Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — INDUSTRY

British Leyland

Mr. Hal Miller: asked the Secretary of State for Industry what is the size of the next tranche of public funds to be allocated to British Leyland.

The Secretary of State for Industry (Mr. Eric G. Varley): I refer the hon. Member to my statement on 21st July when I announced the Government's acceptance of the recommendation of the National Enterprise Board that British Leyland should be provided with the first tranche of £100 million of loan capital.

Mr. Miller: As the NEB report calls for £500 million by 1978 and the new Mini, on the managing director's figures, costs £200 million, does it make sense to deal with the matter in this way? Can the right hon. Gentleman identify the item of capital expenditure to which the £100 million refers?

Mr. Varley: We have already set out a great deal of information about the NEB and its report to the Government, but I shall consider any representations about additional information. We are to debate this matter tomorrow night after 10 o'clock and it may be that I shall have something more to say then.

Mr. Litterick: Is my right hon. Friend aware that hon. Members on the Government Benches are gratified at the constructive response of the workers and management of British Leyland to the intervention of Parliament to save this valuable British asset? Is he also aware that the hon. Member for Bromsgrove

and Redditch (Mr. Miller) has been a consistent critic and attacker of the British Leyland enterprise, and that if his views were carried out thousands of workers would be made redundant?

Mr. Miller: On a point of order, Mr. Speaker—

Mr. Speaker: Order. We are beginning early today. Question Time is not an occasion for attacking individuals.

Mr. Varley: My hon. Friend is right. There have been a few attacks—

Mr. Miller: On a point of order, Mr. Speaker.

Mr. Speaker: Order. If the hon. Gentleman is patient, I may call him for a second supplementary question.

Mr. Varley: There have been a few attacks from the Opposition, though we need not go into them now because there is to be a debate tomorrow night. My hon. Friend is right in saying that there has been considerable progress and achievement in British Leyland, and I know from my own discussions with the management and workers that they intend to ensure that that progress is maintained.

Mr. Tebbit: Why has the Secretary of State not answered the Question on the Order Paper about the size of the next tranche to be allocated? He allocated £100 million last week. Is he now committed, by that action, to the next £100 million? Last week's allocation is already water under the bridge, or money down the drain.

Mr. Varley: It depends on the monitoring that may be undertaken by the NEB and the report that it makes to the Government. It is for the board to monitor the activities of British Leyland. I hope the hon. Gentleman shares my commitment to the long-term success of British Leyland. This depends, as my right hon. Friend the Member for Huyton (Sir H. Wilson) said in April last year, on improvements in productivity and labour relations.

Mr. Robinson: Is my right hon. Friend aware that outside as well as inside the House there is wide support for his decision, not only because it removes great uncertainty among the men and management of British Leyland but because it could be the start of a major


investment incentive, with the creation of new jobs in the Midlands? Is he aware that he should not pay too much attention to the wild and inaccurate allegations of the hon. Member for Henley (Mr. Heseltine), which we are looking forward to debating tomorrow?

Mr. Varley: My hon. Friend is right. The decision has been welcomed in the West Midlands and in other areas of the United Kingdom where there is British Leyland activity. I always pay due regard to comments from the Opposition.

Mr. Heseltine: Does the right hon. Gentleman understand that by failing to answer any of the questions put to him today he is doing British Leyland's case more harm than good? Will he explain why it is necessary for the £30 million order to be given as a result of a direction under the Industry Act 1975 tomorrow night rather than as a direct investment by the NEB?

Mr. Varley: There is a case for allocating a sum to the board and letting it take over the whole responsibility. It may be that we shall have to consider that in future. The hon. Gentleman has written me a long and detailed letter and I have had a meeting with him and his hon. Friend on this matter. I am looking at it very carefully. If I can provide additional information I shall do so, and I shall try to provide it in time for tomorrow's debate.

Mr. Miller: While pausing to remind the hon. Member for Birmingham, Selly Oak (Mr. Litterick) that I voted for the British Leyland support operation, may I ask the Secretary of State whether it is not true that the £100 million in fact commits the next part of the capital programme? Therefore, should he not be asking the House for the full amount of a programme—either a model or the re-equipment of a factory—so that it can be judged on a sensible basis?

Mr. Varley: I am not so sure that is the best way of proceeding. The NEB has been given the task of monitoring the performance of British Leyland, and at the end of the day we have to rely to a great extent on the board's advice. The hon. Gentleman should know—I know that the House takes it into account—

that the board of the NEB contains very experienced men, not only those whom we have been successful in obtaining from the British trade union movement but also senior industrialists—[Interruption.] It is no good the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) scoffing at that, because by doing so he is scoffing at some very experienced men in British industry.

National Enterprise Board (Finance)

Mr. Tim Renton: asked the Secretary of State for Industry what is the effect of public expenditure cuts on the NEB's programme.

Mr. William Hamilton: asked the Secretary of State for Industry what additional funds are to be made available to the National Enterprise Board in the course of the next two financial years.

Mr. Varley: My right hon. Friend the Chancellor of the Exchequer has declared the Government's intention to increase significantly the resources available for selective assistance to industry through the NEB and the Scottish and Welsh Development Agencies.

Mr. Renton: Does the Secretary of State recognise that most of the country will be appalled if, at a time when private consumption is cut and private investment is hamstrung by a new payroll tax, the Government continue on their profligate way, wasting money through the NEB? Surely the NEB is one of those unique birds that should be hatched out with its wings already clipped.

Mr. Varley: The hon. Gentleman may well be anticipating the debate that will take place later today, when the package announced by the Chancellor will be debated fully. The NEB is a major component of the Government's industrial strategy—we have never made any secret about that—and it must have the resources to operate.

Mr. Hamilton: Is not my right hon. Friend appalled by the gross interference of the President of the Confederation of British Industry, who has been advocating an investment strike in the private sector? In those circumstances, will my right hon. Friend give a categorical assurance that the funds available to the National Enterprise Board will be


significantly increased, in particular in Scotland? Will he spell that out in much more detail, or is he leaving it to this afternoon's debate?

Mr. Varley: I cannot anticipate anything that my right hon. Friend the Chancellor will say this afternoon. We have said that the resources for the NEB and the Scottish and Welsh Development Agencies should be increased significantly. I cannot give a figure this afternoon, but we attach very high importance to ensuring that the NEB fulfils its major role of helping to regenerate British industry.

Mr. Grylls: Surely the Secretary of State should be able to say how much extra money the board is to be allocated during 1977–78, at least. He cannot get away with merely telling the House that the board is to have more money without being more specific. Will he say precisely what the figure is to be? Will he answer the question asked by my hon. Friend the Member for Mid-Sussex (Mr. Renton) about taking money with one hand from industry, in taxation, and, with the other, giving it out to the NEB ad lib? It does not make any sense.

Mr. Varley: This enables me to answer a point that I did not answer fully when it was raised by my hon. Friend the Member for Fife, Central (Mr. Hamilton). I think that the CBI has over-reacted to the package announced by my hon. Friend. I dare say that there will be discussions about it at the National Economic Development Council meeting on Wednesday. The package has to be seen as a whole. There have been relaxations in the Price Code, which will assist investment and assist companies.
On the question of the amount of any assistance to the NEB, we said in the White Paper that was published last year that the figures for next year and up to 1979–80 are necessarily arbitrary and will be kept under review. We are determined that resources shall be made available to the board. I ask the hon. Gentleman to be a little patient, because we shall make an announcement in due course.

Mrs. Bain: Is the Secretary of State aware that we on the Scottish National Party Bench are delighted that the NEB

will have an increased budget, as we have pressed for this? Will he indicate whether the new budget will be anywhere near the £300 million per annum that we have asked for, and how many jobs he estimates that these funds will create in Scotland?

Mr. Varley: I am not at all sure that the Scottish National Party has been all the time wholly enthusiastic about the Scottish Development Agency. I cannot give the hon. Lady the information that she requires about the amount of money to be allocated to the agency. In any case, it is a matter for my right hon. Friend the Secretary of State for Scotland. However, the hon. Lady can be assured that additional resources will be provided.

Mr. Buchan: Does my right hon. Friend agree that the statement by the CBI amounts to a kind of sabotage of the Government's economic strategy? In comparing the relative attitudes of the CBI, on the one hand, and the TUC, on the other, will my right hon. Friend answer the question: who are the patriots now?

Mr. Valley: My hon. Friend is right, in the sense that the TUC and those who lead it have made considerable sacrifices on behalf of the country. I think that that is widely understood and recognised by most fair-minded people. I only hope that, on reflection—I do not want to say much more than that—those who lead the CBI will recognise that their comments have not been of help over the last few days.

Mr. Tom King: Will the Secretary of State explain what point there would have been in Lord Watkinson writing a letter at this time, when all the recipients of the letter would have been busily engaged in trying to calculate what effect the Chancellor's announcement would have on their next year's cash flow, not knowing what funds they had available? What discussions were held with industry in parallel with discussions held with the TUC before these announcements were made?

Mr. Varley: The question of discussions was not for me. [Interruption.] I believe that discussions took place between my right hon. Friend the Chancellor and representatives of both sides


of industry and officials of the Department. If the hon. Gentlemen really wanted the industrial strategy to work and industrial investment to increase, he would be better occupied in calling on the CBI to adjust its attitude. That would be by far the better way of going about it. We know that investment will increase, on the basis of indications that we have already seen, and I suspect that when figures are published within the next few days they will show that many companies are going ahead with their investment decisions, in spite of what has been said.

Several Hon. Members: rose—

Mr. Speaker: Order. We shall have to go much quicker on the rest of the supplementary questions.

Post Office (Chairman)

Mr. Newton: asked the Secretary of State for Industry when he next intends to meet the Chairman of the Post Office.

Mr. Mawby: asked the Secretary of State for Industry when he last met the Chairman of the Post Office.

The Minister of State, Department of Industry (Mr. Gerald Kaufman): My right hon. Friend and I regularly meet the Chairman of the Post Office.

Mr. Newton: Is the Minister satisfied that the Post Office results are within the terms of the Price Code? When he next meets the Chairman of the Post Office Corporation, will he invite him to give back to the public at least some small part of the profits, in the form of a restoration of Sunday services?

Mr. Kaufman: I refer the hon. Gentleman to the statement that my right hon. Friend made with regard to the Price Code. As for giving back money as a result of the profit made, when the hon. Gentleman advises private enterprise that whenever it makes a profit it should hand part of it back I shall take him seriously, but his party has been consistently demanding realistic pricing by the Post Office. Now that the Post Office is moving towards realistic pricing, the hon. Gentleman wants to damage it.

Mr. Roy Hughes: On the question of Sunday collections, will my hon. Friend bear in mind that not only families in their personal correspondence have been badly affected but also one-man businesses, which invariably deal with their

accounts and correspondence over the weekend?

Mr. Kaufman: That is why the Post Office has promised to review the question of Sunday collections within a year of the decision.

Mr. Mawby: When the Minister next sees Sir William, will he ask him whether he believes that the movement of second-class local post to a distant sorting office and back again makes economic sense, or is it a way of wasting time in order to induce people to use the first-class post?

Mr. Kaufman: I shall certainly raise matters of that kind with Sir William when I next see him. If the hon. Gentleman has a particular case in mind, I shall be very glad to refer it to Sir William.

Steel (Productivity)

Mr. Ridley: asked the Secretary of State for Industry what estimate he has made of the increase in labour productivity in the steel industry in recent years.

The Under-Secretary of State for Industry (Mr. Les Huckfield): An index of output per man year is compiled by the Iron and Steel Statistics Bureau. Between 1967 and 1973 the rate of growth in the index was 3½ per cent. per annum. Between 1973 and 1975, however, the index fell by 13 per cent. per annum, owing to the deep world-wide recession throughout the industry.

Mr. Ridley: What an extraordinary admission, that the Goverment have actually brought steel productivity down. In view of the Government's statement last week that they wished to bring it down further by keeping open uneconomic mills, will the hon. Gentleman tell the House whether the instructions to the BSC are to increase productivity or to increase employment? The hon. Gentleman must know that he cannot do both.

Mr. Huckfield: Obviously we want productivity in the steel industry to increase. The hon. Gentleman ought to realise that the whole of the British Steel Corporation's investment programme was held back in 1971 and 1972 while the joint steering committee set up by his party considered it.

Mr. Heseltine: Will the hon. Gentleman say what concrete progress has been made towards achieving the specific targets set out in the document put before the House earlier this year, after agree-


ment between the steel unions and the British Steel Corporation?

Mr. Huckfield: The hon. Gentleman is right to refer to the British Steel Corporation's agreement with the TUC steel committee about the potential reduction of 20,000 jobs in the steel industry. Obviously this is a continuing matter, and a review into the whole subject is going ahead.

Mr. Ronald Atkins: Docs my hon. Friend agree that the steel industry still suffers from generations of neglect in investment by private enterprise before the steel industry was taken over, and that, even allowing for the fact that, with the recession, productivity is bound to fall through inadequate use of existing capacity, nevertheless there is a need for increased investment?

Mr. Huckfield: My hon. Friend is absolutely right. The British Steel Corporation does have a large amount of obsolescent plant. The replacement of that obsolescent plant is not helped by the joint steering committee, which the Conservative Party set up. It is not helped by the Conservatives' increased and continuing opposition to the Iron and Steel (Amendment) Bill.

Steel Investment (Wales)

Mr. Michael Marshall: asked the Secretary of State for Industry what representations he has received following his statement in the House on 19th July regarding steel investment in Wales.

Mr. Kaufman: My right hon. Friend and I have received a number of representations. Among them was a letter from the Shotton Steelworkers Action Committee, which expressed its support for the decision that my right hon. Friend announced in his statement and for the way the Government have been conducting the closures review.

Mr. Marshall: Will the Minister of State confirm that among the representations he received was a letter from the President of the Metallurgical Plant-makers Association in which he said that the decision to offer half the money required for Port Talbot was industrial nonsense? Will he further confirm that the MPA made it clear that because of delays and inaction by the Government the threat of unemployment looms in South Yorkshire and in the North-East?

Mr. Kaufman: That is a broad paraphrase of the letter. I shall be discussing these matters with the organisation.
The hon. Gentleman will be pleased to know that the Shotton Steelworkers Action Committee told my hon. Friend that it wished to thank him not only for the way in which the review of Shotton's case was carried out but for the decision itself. The writer of the letter from the action committee added:
May I also take this opportunity to thank you and the Labour Party for your co-operation and for the honouring of your pre-election promises regarding the 10-year strategy on steel.

Sir A. Meyer: Commercials apart, is the hon. Gentleman aware that he has raised very high hopes in the North-East by undertaking to reconsider the whole basis of the comparison of costs between Port Talbot and Shotton? Is he also aware that the figures on which the reexamination will be conducted have not significantly altered during the last two years and that any decision reached could have been reached two years ago?

Mc. Kaufman: I am grateful to the hon. Gentleman for saying that we have raised high hopes. He ought to sort himself out with the hon. Member for City of Chester (Mr. Morrison) who said that our decision was a "thumbs-down" for Shotton.

Shipyard Workers' Unions

Mr. Canavan: asked the Secretary of State for Industry when he next expects to meet representatives of the shipyard workers' unions.

Mr. Varley: A meeting will be arranged as soon as the working group which I have set up with the Confederation of Shipbuilding and Engineering Unions and the Organising Committee for British Shipbuilders is ready to report.

Mr. Canavan: Will my right hon. Friend tell the shipyard workers, who are keen to see the new Bill on the statute book, that last Thursday, when we were faced by the united opposition of the Tories and their two-faced lackeys in the SNP, we had to bring in several very ill and courageous Labour Members of Parliament to vote in order to make sure that the Bill got a Third Reading, because of the lack of ordinary, decent, human compassion on the part of


that hard-hearted woman who pretends to lead the Opposition?

Mr. Varley: I am sure that those in the shipbuilding industry who are anxious to see us press ahead with the public ownership of the industry will have noted the actions of all the Opposition parties in this House.

Mr. Michael McNair-Wilson: Will the hon. Gentleman take note of the promises inherent in New Clause 12 in the Aircraft and Shipbuilding Industries Bill and ask the representatives of the shipyard workers in Belfast to attend the meeting?

Mr. Varley: I think that some of the union representatives whom I have seen have members who work in Harland and Wolff. I think they are adequately represented.

Small Firms (Assistance)

Mr. David Mitchell: asked the Secretary of State for Industry if he will take action further to assist small firms to take advantage of the assistance provided under Sections 7 and 8 of the Industry Act 1972, as recommended by the recent reports of the special working parties set up to examine problems facing the major sectors of British industry.

The Minister of State, Department of Industry (Mr. Alan Williams): Small firms established in assisted areas are already eligible for regional selective assistance. Section 8 of the Industry Act, however, requires that enterprises assisted should be of significance in a national context. The reports of the sectoral working parties are being considered.

Mr. Mitchell: Is the hon. Gentleman not aware that the Chancellor of the Exchequer's 2 per cent. increase in national insurance contributions by employers will take over £200 million out of the small business sector? Does he recognise that small businesses will be able to get on much better with their job of producing if they are left alone, and if they have less taxation to pay and less interference from the Government?

Mr. Williams: The hon. Gentleman seems to be overlooking the fact that if the alternative course, which is apparently favoured by the Opposition, were followed and a further £1,000 mil-

lion were taken back in cuts, plus the sum currently being cut from defence, many small firms might be wiped out as a result.

Mr. Maurice Macmillan: Does the hon. Gentleman realise that there have been three attempts to sell the shares of private companies this year, all of which have failed due to lack of money among investors? Does he appreciate that it is not reasonable for him to blame the CBI for this, and that blame should be attributed to policies that have reduced almost to nil the possibilities of new investment in small and growing firms?

Mr. Williams: The right hon. Gentleman still has to face the fact that the alternative was to allow further slippage in sterling, which would damage firms large and small, or to undertake further cuts, with the consequence to which I referred in reply to a previous question.

Mr. Tom King: The Government constantly tell us of the great interest they have in small businesses. Will the hon. Gentleman tell the House what consultations he had with small businesses about the introduction of this employment tax?

Mr. Alan Williams: Of course, there were no specific consultations with small firms, but they are spoken for. As the hon. Gentleman is aware, the CBI has its own unit, which speaks for small firms, and I have recently had consultations with representatives of this unit.

Aircraft and Aero-Engines

Mr. Tebbit: asked the Secretary of State for Industry what effect upon the support of new civil aircraft and engine projects he expects from the Government's review of public expenditure.

Mr. Kaufman: As in the past, proposals for new civil aircraft and engine projects will be considered on their merits and in the light of other claims on public expenditure.

Mr. Tebbit: Does the Minister of State seriously think that that is an answer to the Question? If so, I must advise him to read it again. When the Secretary of State agreed with the Government's expenditure cuts for the nationalised industries, did he take into account how much money would be required for the nationalised industries? How much is it to be, and by how much has it been cut? Someone must know.

Mr. Kaufman: What we do know, or would have known if the Opposition had not howled me down with their jungle noises last Thursday night, is that the Government have just made £6½ million available for underwriting the BAC111 and extending the holding contract on the HS146. The Tories were ranting about other things and would not allow that to be announced.

Mr. Warren: If the Minister of State is right that there will be no cuts, will he bring to the House this afternoon an announcement about the future of the Rolls-Royce 10-ton engine, which has been before him for two months? Further, will he give an assurance that, if there are no cuts, that will in no way affect his proposal to the French and the West Germans to buy work that they have already completed by investing in the Airbus?

Mr. Kaufman: I have nothing to announce at this stage on the hon. Gentleman's first question. As for his second, it is only since the Organising Committee began conducting conversations with Aerospatiale and others that we have begun to make any progress. As for participating in the Airbus project, Lord Beswick and I will continue the discussions.

Wool Textiles (Manpower)

Mr. Madden: asked the Secretary of State for Industry what are the latest conclusions in the manpower implications of any extension of the wool textile scheme; and if he will make a statement.

Mr. Alan Williams: The applications by the Wool Textile EDC for a further scheme of assistance is still under consideration by my Department. The effect on manpower of a new scheme, if it is approved, will depend on the number and kind of projects put forward by firms. The EDC's proposals, which are fully supported by unions and employers in the industry, do not include assistance to firms closing down, as was the case in the original scheme. However, the possibility of redundancies arising in any new scheme cannot be ruled out.

Mr. Madden: Does the Minister appreciate that there is growing concern within the industry about the possible shortage of capacity and the shortage of skilled workers when the upturn in world trade brings about increases in demand

for the wool textile industry? Will these matters be taken into close consideration in any further consideration that is being given to an extension of the scheme?

Mr. Williams: I am aware that some people have expressed such concern. However, we are satisfied that there is sufficient capacity and that there are adequate supplies of skilled manpower available. I emphasise that the proposals have been supported by both sides of the industry.

Mr. Richard Wainwright: Is the hon. Gentleman aware that the great efforts of the industry during the past three years, assisted by the Government's wool textile scheme, have put it in a splendid condition for taking advantage of the expected upturn in world trade? Will he do his best to hasten on a further scheme so that the wool textile industry can join the ranks of the well-paid communities?

Mr. Williams: The hon. Gentleman is absolutely correct in praising the efforts of the industry, involving both employers and employees. It has had a remarkable record over recent years. The latest proposal was discussed at the EDC on 6th July, and on 20th July the EDC submitted a supplementary paper to the Department, which we are now considering. We hope to be able to announce a decision very soon.

Mr. Cryer: Does my hon. Friend accept that the announcement of the wool textile scheme is awaited with a great degree of interest and, in some cases, urgency? Does he agree that the industry should be looked at in the round? If capacity is to be retained that will make the textile scheme worth while, something must be done about cheap imports. In 1975 15,000 jobs were lost in the textile and clothing industries. Does my hon. Friend agree that we must examine imports in order to stop that sort of loss?

Mr. Williams: The whole situation must be considered. As my hon. Friend is aware, the situation in the wool sector has improved already. I am glad to say that the upturn has already started in that sector. Only last week, with my right hon. Friend the Secretary of State for Trade, I attended a meeting with the representatives of the clothing industry to discuss the very points that my hon.


Friend has mentioned. I am sure that he will appreciate that decisions in that respect lie with the Department of Trade.

Intermediate and Unassisted Areas

Mr. MacGregor: asked the Secretary of State for Industry whether he will review the classifications for intermediate areas and unassisted areas, in view of the fact that there is now higher unemployment in some of the latter than in some of the former.

Mr. Alan Williams: Regional policies are concerned with long-term structural unemployment and associated problems. Recession has had different effects in different parts of the country, and these effects have obscured the underlying problems in particular areas.

Mr. MacGregor: In view of the large fluctuations in unemployment, will the Minister be prepared to consider a more flexible system for dealing with proposals in unassisted areas, where this may have an important but very local employment connotation? Is he aware that other things, apart from regional development assistance, hang on development area status, such as grants for tourism? Will he look more flexibly on these matters as a whole?

Mr. Williams: It is difficult to answer Opposition Members when they say that they want public expenditure cuts and at the same time say that they want to extend the areas where expenditure will be applied. I realise that there is a real concern in many parts of the country that are experiencing unprecedented levels of unemployment. For that reason we are operating the IDC policy flexibly and using our selective powers as sensibly as possible. In general terms, I do not envisage any major change of boundaries, as intimated in the Question.

Mr. McNamara: Is my hon. Friend aware that for "intermediate and unassisted areas" one could say "intermediate and development areas"? That is particularly true in the Humberside area. Is my hon. Friend aware that in many parts of the intermediate areas there is chronic, persistent and structural unemployment that is higher than in the development areas? Is any of the assistance that is going to the development areas, in terms of REP, for example, likely to go to the intermediate areas?

When does he hope that his Department's review of regional policy will be completed, so that we can see where we stand?

Mr. Williams: My hon. Friend is aware that recently I announced measures to help Humberside, where several major projects are going ahead that will provide a massive increase in jobs in the construction industry. It must be borne in mind that Humberside's fundamental difficulty has not been that it is intrinsically unattractive to industry but that it has been remote from the major transport networks. The changes that have taken place, in terms of access to the motorways, as a result of bridge construction, and so on, will substantially improve the position of the area.
In view of the new situation that arose as a result of the fisheries decision, after consultations with those of my hon. Friends who represent constituencies in Hull and Grimsby I have had further discussions with my right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs and my right hon. Friend the Minister of Agriculture, Fisheries and Food. I hope to be able to announce one or two minor additions to our programme in the near future.

Industrial Policy

Mr. Forman: asked the Secretary of State for Industry if he will make a further statement on the Government's industrial policy in the light of the work being done in the National Economic Development Office.

Mr. Varley: I have nothing to add to my statement of 8th July.

Mr. Forman: Is the right hon. Gentleman aware that all the so-called new industrial strategies and all the work of sector working groups are worth little or nothing so long as the Government continue to shatter fragile industrial confidence from time to time with their other policies? Is he further aware that the most recent example is the increase of national insurance contributions for employers? Will he give an assurance that in future both sides of industry will be consulted before damaging measures of this kind are introduced?

Mr. Varley: Both sides of industry are consulted. As I have already said, I think that the CBI has over-reacted to


the package. I dare say that on reflection it will take a different view. I know that Lord Watkinson and the Director-General have said that irrespective of anything that has taken place over the past few days it is their intention to continue to co-operate with the industrial strategy. That is a realistic view.

Mr. Heseltine: Does the right hon. Gentleman understand that no consultation took place with the CBI about the payroll tax? How much of the £1,000 million now being levelled on industry through the payroll tax does he calculate will be met by passing it on in increased prices and how much of it will have to be met from the corporate resources of British industry?

Mr. Varley: We have not pretended that the increased national insurance contributions will not have a slight and damaging effect on companies. However, the package has to be seen as a whole. There have been changes, not only in the Price Code, and national insurance contributions are an allowable cost. I do not have any precise calculations in front of me. If the hon. Gentleman wants to table a Question, we shall attempt to give him an answer. Instead of talking down the industrial strategy, the hon. Gentleman should be assisting the Government and both sides of industry to ensure that our economy becomes strong again. If he were to do that instead of putting forward his constant carping criticism, he would be respected.

Shotton Steelworks

Mr. Peter Morrison: asked the Secretary of State for Industry whether he will pay an official visit to the Shotton steelworks.

Mr. Varley: I have no plans to do so.

Mr. Morrison: Will the Secretary of State visit Shotton, on the future of which he has yet to make a final decision? When will that be?

Mr. Varley: I want a thorough investigation made of the prospects not only for Port Talbot but for Shotton. I shall not make a decision on Shotton on information which at this time is probably inadequate.

Mr. Brittan: Whatever the Secretary of State may be doing in Wales, will he ensure that he does not allow himself to be deflected from his proclaimed industrial strategy on Teesside? Will he accept promptly BSC's proposals for a plate mill at Redcar, where it will form part of a fully-integrated steel complex, able to face world-wide competition?

Mr. Varley: I am currently considering the British Steel Corporation's proposals for Redcar. In due course we shall make our views known.

Mr. Heffer: Will my right hon. Friend reconsider the question of going to Shotton? It would be important if he did so. On the way, will he also go through Merseyside, which is near Shotton, and study the very serious industrial problems that exist on Merseyside—the lack of industry, the high level of unemployment, and the fact that, in relation to the point raised by other hon. Members, a development area like Merseyside requires all the assistance it can get, because of the seriously high level of unemployment and the lack of the industry that the area needs?

Mr. Varley: What I said was that I had no plans to go to Shotton. I do not rule it out in future, and if I do go to that part of the country I shall certainly consider going to Merseyside. My hon. Friend is right; the prospects and problems of Merseyside are formidable. We took them into account in considering our original policies. Later today, as my hon. Friend is aware, I am to meet the Merseyside group of Labour Members to go into the position in more detail.

Production

Mr. Adley: asked the Secretary of State for Industry what steps he intends to take to raise the level of industrial production.

Mr. Alan Williams: Industrial production is already rising, mainly in response to export demand. We have already taken a number of steps to put firms in a better position to take full advantage of the upturn.

Mr. Adley: In view of the Government's outstandingly successful employment policies, which have given us unemployment at record levels, why does


the Minister think that the level of industrial production now appears to be lower than it was during the three-day working week?

Mr. Williams: The hon. Gentleman seems to overlook the fact that the world has gone through its worst recession since the war, and obviously we could not escape that. Of course, in that context, manufacturing investment has fallen, but at the moment the output is showing signs of increasing. In the second half of this year—and certainly next year—we expect to see an increase in investment.

Mr. Dalyell: In order to take advantage of the upturn, what is being done to identify potential bottlenecks?

Mr. Williams: Bottlenecks have particularly attracted attention in the context of the sectoral studies within the NEDC. The Department is now following up the recommendations of those studies to see what action can be taken to eliminate bottlenecks. In addition, we have also established certain industry schemes which are working towards that objective, as indeed is the Accelerated Projects Scheme.

Mr. Nelson: Will the Minister now explain why the Government have deliberately chosen to follow a policy of confrontation with industry by introducing the employment tax—the payroll tax—last week? Does he recognise that that alone will substantially undermine the opportunity for industry to invest, and seriously debilitate the prospects of those industries employed in the export field not passing on the extra costs that this tax will impose on them?

Mr. Williams: If this is what the hon. Gentleman calls confrontation, he must call the situation that his Government produced outright war.

Mr. Robinson: Is my hon. Friend aware that we on the Government Benches are sick and tired of the ignorance of Conservative Members, at a time when manufacturing industry is paying no mainstream corporation tax, when its gearing is at an all-time low, and when it is flush with cash and has access to enormous funds which would enable it to get that investment up and industrial production up? Will he therefore take that up as a matter of urgency with the CBI?

Mr. Williams: I have no doubt that what my hon. Friend has said will be noted with interest by those who speak on behalf of industry. I re-emphasise what my right hon. Friend the Secretary of State has said, namely, that we believe that, on reflection, looking at the package as a whole, the CBI will realise that it has over-reacted. We hope that Wednesday's NEDC meeting will clear the air.

Mr. Heseltine: When he is thinking about the question of ignorance of facts, will the Minister remind the hon. Member for Coventry, North-West (Mr. Robinson) that after the last two years of Labour Government the balance of corporate strength is negative in British industry?

Mr. Williams: I am sure that my hon. Friend will have noted that comment, for what it is worth.

Management (Government Appointments)

Mr. Atkinson: asked the Secretary of State for Industry if he is satisfied that his Department has adequate ways by which it is able to talent-spot, select and appoint top management to those sections of industry which are in receipt of public money, and to which it has the right of appointment.

Mr. Les Huckfield: Yes, Sir. Government appointments are carefully selected according to the experience and ability required and appropriate selection arrangements exist. Our practices are kept under constant review.

Mr. Atkinson: Does my hon. Friend agree that one of the many reasons for the public ownership of industries is to enable those industries to democratise their methods of managerial selection? Is it not a fact that there is a great deal of talented and imaginative leadership in industry which is yet undiscovered by the Government? Will my hon. Friend therefore set up an inquiry into ways and means of identifying the sort of managers who are now necessary to take over the leadership of British industry?

Mr. Huckfield: I have taken careful note of what my hon. Friend said. He will of course already know that the Bullock Committee is presently inquiring into industrial democracy and that we


hope to introduce legislation to implement it during the next parliamentary Session. I certainly bear in mind, as does my right hon. Friend, what my hon. Friend has said.

Mr. Peter Bottomley: Do the lists maintained by the hon. Gentleman's Department contain the names of any members of the Tribune Group? Does he intend to appoint any of those to top positions in industry? What previous experience have they had in running manufacturing industry?

Mr. Huckfield: I hope that the hon. Gentleman is not using his own lack of industrial experience as the yardstick. Certainly the industrial and trade union movement experience of my hon. Friends in the Tribune Group, in sum, is considerable.

Mr. Tom King: Since the Prime Minister is present, could he not have answered this Question and perhaps have considered whether it is not high time for a bit more talent-spotting in the Department of Industry when Ministers are appointed? In the presence of the Prime Minister, will the Under-Secretary confirm that it is still the policy of his Department, as enunciated by the Minister of State, that only good Socialists should be appointed to positions of authority in nationalised industries?

Mr. Huckfield: I cannot give the hon. Member that assurance. Nor can I help him, because we certainly do not have him in mind at the moment. If he is expressing doubts about his confidence in some of the present chairmen of nationalised industries, he should not forget that many of them were appointed by his own party.

National Enterprise Board (Regional Policy)

Mr. Stan Crowther: asked the Secretary of State for Industry what steps he proposes to take in order to use the National Enterprise Board as an instrument of regional policy, with particular reference to the establishment of industrial undertakings with long-term growth potential in areas of high unemployment.

Mr. Varley: The draft guidelines for the board require it, wherever possible,

to expand and develop its operations in areas of high unemployment. The board is particularly concerned to establish undertakings with long-term growth potential. The additional funds that we shall be making available to it next year will be useful for this.

Mr. Crowther: I hope that my right hon. Friend will accept from me that that announcement will be very welcome in my constituency. Does he agree that this type of operation, with the NEB directly involving itself as a public enterprise in manufacturing industry, as distinct from merely propping up derelict private enterprise firms, will not only greatly assist in solving the unemployment problem in areas like mine but may also contribute to reducing the balance of payments deficit by producing goods that are now being imported?

Mr. Varley: I agree with a great deal of that. In the seven months that the National Enterprise Board has been in existence, it has made a very good start. It is seizing all the promising opportunities to get into partnership with new ventures. It is certainly our intention, as the Labour Party document "Labour in Industry" said, that it should not become the repository of "lame ducks".

Mr. Heseltine: As the Secretary of State constantly tells us that he does not know what additional funds will be available for the NEB next year, how can he know that these funds will be of help to the regions?

Mr. Varley: The hon. Gentleman is extremely schizophrenic. First of all he tells us that the NEB should be abolished and should have no further funds, and then he says that it should have funds but complains that we are not being precise about the matter. The NEB will have funds and in due course we shall tell the hon. Gentleman and the House what they will be.

HS146 Aircraft

Mr. Frank Allaun: asked the Secretary of State for Industry when he expects to conclude his consideration of future development of the Hawker Siddeley 146.

Mr. Kaufman: I would refer my hon. Friend to my statement during Third Reading of the Aircraft and Shipbuilding


Industries Bill and to the subsequent Press statement issued by my Department on Friday 30th July.

Mr. Allaun: As it is 18 months since this project was put on ice, is it not time that my hon. Friend took it off ice and provided funding for continued development? Would not this project provide alternative work for aircraft workers if arms spending is cut, as I hope it will be?

Mr. Kaufman: If my hon. Friend had had the opportunity of hearing my winding-up speech last Thursday night—which was denied to him by Opposition Members—he would have heard that the Government are making available £3½ million extra for the development of the HS146. That will save 400 redundancies in the Hatfield area, retain the momentum of the holding contract and enable the board of British Aerospace when it is set up to make further recommendations about the way in which the project should go ahead.

Mr. Warren: Is the Minister aware that the sum of money that he announced will have to be multiplied by 80 to get the project off the ground? Will he explain to the workers at BAC Weybridge that there will not be any money left for them to be employed on the project as well?

Mr. Kaufman: The hon. Gentleman's figures are entirely inaccurate. As for the workers at BAC Weybridge, had I been allowed to make my statement he would have heard that some 1,500 of them, together with workers at Hurn, will have their jobs saved by the underwriting of five further BAC111s.

Mr. James Johnson: Will my hon. Friend bear in mind not only that this aircraft will provide jobs for the men on Humberside at the Hawker Siddeley works but that it is a winner in the Third World? Does he not agree that it is an ideal plane for landing in the bush and open spaces all over Africa? [Interruption.] Let us forget Amin for a moment. It is an ideal plane for landing in open spaces all over the world.

Mr. Kaufman: This plane has many advocates, and that is one of the reasons why we have decided to extend the holding contract and spend money on it. I

am aware that the workers at Brough are enthusiastic about the project since I had an opportunity of meeting them and hearing workers speak in its support. I also agree with the slogan they posted all over the factory stating "Buy Brough—Buy British".

Mr. Warren: If my figures are wrong, what are the right figures? The hon Gentleman must know them.

Mr. Kaufman: When we get the industry into public ownership and figures of this kind are no longer commercially confidential to Hawker Siddeley Aviation, I shall be able to consider the hon. Gentleman's question on its merits.

PREVENTIVE JUSTICE

Mr. Biggs-Davison: asked the Attorney-General what consideration he has given, in his capacity as Attorney-General for Northern Ireland, to the papers on preventive justice submitted to him.

The Attorney-General (Mr. S. C. Silkin): I am grateful to the hon. Member for bringing to my attention a memorandum on preventive justice prepared by a member of the Northern Ireland and English Bars. I have discussed it with the Director of Public Prosecutions for Northern Ireland. Whilst it is primarily a matter for the police and the courts, the Director and I will have regard to it as occasions may arise.

Mr. Biggs-Davison: While I thank the right hon. and learned Gentleman for that reply, may I ask whether he does not think that perhaps there should be a greater sense of urgency in view of the appalling events and depressing criminal statistics for Northern Ireland, which reveal very little progress in the restoration of law and order? Is not this instrument, which has been used in Northern Ireland in the past, something which could be very useful?

The Attorney-General: I am bound to tell the hon. Gentleman that we do not see this particular instrument as adding much to the law as it stands, but, where there is an opportunity we shall have regard to it.

LEGAL AID

Mr. Christopher Price: asked the Attorney-General what was the cost of legal aid in 1973, 1974 and 1975, respectively.

The Attorney-General: The total net cost of legal aid on my noble Friend's Vote—namely, civil legal aid, legal advice and assistance, and legal aid for criminal cases in magistrates' courts—was £21·2 million in the financial year 1973–74 and £28·9 million in the year 1974–75. The figures for 1975–76 have not yet been audited, but they are estimated to be about £40 million. The total net cost of legal aid in respect of the higher criminal courts, which falls in the Vote of my right hon. Friend the Home Secretary, was £10·3 million in 1973–74, £14·4 million in 1974–75 and £18·4 million in 1975–76.

Mr. Price: Is my right hon. and learned Friend aware that this is an area of accelerating public expenditure and one which we should examine to find proper sources of savings? Does he not consider that the hiring from public funds of expensive QCs to argue for days and days about who said what to whom in police stations could be eliminated by changing the Judges Rules and by tape recording all interviews in police stations? What progress is being made to save money and turn it over to essential areas of legal aid?

The Attorney-General: I am not sure that that would necessarily save any money in counsel's fees. This is a matter which has been under consideration, but it is a question for my right hon. Friend the Home Secretary. I am sure that if my hon. Friend put down a Question to the Home Secretary he would be able to give him the latest thinking on that subject.

Mr. Fletcher-Cooke: Has the proportion of legal aid for family matters and matrimonial disputes remained constant in the last three years?

The Attorney-General: It may have done but I cannot say offhand whether it has. The hon. and learned Gentleman will have noted that the total civil legal

aid has gone up by a large amount, and that includes aid for family matters.

OFFICIAL INFORMATION (DISCLOSURE)

Mr. Dalyell: asked the Attorney-General what steps he is taking to amend the law relating to the disclosure of official information in the light of the judgment of the Lord Chief Justice in the case of Attorney-General v. Jonathan Cape Ltd. and Times Newspapers.

The Attorney-General: I have nothing to add to the answer given by my right hon. Friend the Member for Huyton (Sir H. Wilson) to my right hon. Friend the Member for Middlesbrough (Mr. Bottomley) on 22nd January 1976.

Mr. Dalyell: If the authorities' attitude towards the publication of volumes two and three of Mr. Crossman's memoirs is, as we understand it, chivalrous and generous, does not the fact remain that the Lord Chief Justice's judgment is ambiguous? If these matters arise in the future, what do the Government propose to do about them?

The Attorney-General: That is precisely what my right hon. Friend said in reply to the Question to which I have already referred. The Radcliffe Committee has reported, and its recommendations have been accepted by the Government and will be carried out.

Mr. Whitehead: Does my right hon. and learned Friend expect to have to appear before the courts again over the publication of volume two of the Crossman diaries? Might it not be best to leave volumes two and three to be published so that we can judge the veracity of his comments for ourselves?

The Attorney-General: I have not been privileged to read as far as volumes two and three, but my hon. Friend will have noted that the Radcliffe Committee recommended that such questions should as far as possible be dealt with without litigation or legislation—that is to say, as a matter of honour. There are certain exceptions that the Radcliffe Committee felt to be essential, and we shall have to see whether they arise in the case to which hon. Members have referred.

CIVIL AVIATION POLICY (SKYTRAIN)

Mr. Higgins: (by Private Notice) asked the Secretary of State for Trade if he will make a statement on Laker Airways Sky-train and civil aviation guidelines.

The Secretary of State for Trade (Mr. Edmund Dell): The revised Policy Guidance to the Civil Aviation Authority which was annexed to the White Paper "Future Civil Aviation Policy" (Cmnd. 6400) was approved by an affirmative resolution of both Houses in February 1976. The judgment by the High Court on 30th July throws into doubt the validity of some important aspects of that guidance and of my predecessor's decision to withdraw the designation of Laker Airways as a United Kingdom scheduled service carrier under the Bermuda Agreement. I am urgently studying the implications of that judgment.

Mr. Higgins: Does the right hon. Gentleman agree that the case for not cancelling Laker Airways Skytrain designation and forcing the CAA to revoke its licence is now even stronger that it was when we debated the matter in February? Why do he and his Department seek to give the impression that there was no vote on that occasion? As he has subsequently reopened the whole question of the United States-United Kingdom Bermuda Agreement, does he intend to include Skytrain in those negotiations? Precisely to what extent does he now believe that he has powers to give directions under the Civil Aviation Act 1971?

Mr. Dell: The hon. Gentleman says that there is now a stronger case for Laker Airways. What is in question here is the Secretary of State's powers. There may well be—I have not yet decided—an appeal on this matter. As to the renegotiation of the Bermuda Agreement, I shall bear in mind the policy adopted by both Houses of Parliament in February.

Sir D. Walker-Smith: In view of this judicial decision and another very recent judicial decision, and as the Prime Minister is fortuitously sitting next to the right hon. Gentleman, would the right

hon. Gentleman be good enough to breath in his right hon. Friend's ear the suggestion that he send a minute to his Ministers calling attention to their duties in respecting the law?

Mr. Dell: All Ministers have a duty to respect the law. In taking the decision which he took, my right hon. Friend the former Secretary of State was acting on legal advice. The right hon. and learned Gentleman is very well equipped to know that the law is not always certain. That is why provision is made for appeals against certain decisions of the courts.

Mr. Tebbit: Is the Secretary of State aware that, following his decision to renegotiate the Bermuda Agreement, this court decision leaves an unprecedented air of uncertainty and muddle over aviation policy? Will he not accept some of the advice which has been so freely given at Tameside, which is to accept the decision of the court, and then stop making policy on these matters a political football? Why does he not accept that Laker has the right to operate as the courts say?

Mr. Raphael Tuck: What is the Court of Appeal for?

Mr. Dell: Unfortunately, whatever decision I now take about an appeal, there is bound to be a period of uncertainty about this country's civil aviation policy. It seems to me, as a layman, that one question raised by the learned judge's decision is whether the Government are entitled to have a policy in these areas. As for the Bermuda Agreement, I thought that the renegotiation was entered into with the support of both sides of the House to improve this country's relative position in civil aviation. I have said that in the renegotiation I shall bear in mind the policy approved by both Houses last February.

Mr. Ioan Evans: Does my right hon. Friend realise that Parliament is a lawmaking body and that if the existing law does not allow the Government to do what is in the best interests of Britain we must seek new legislation?

Mr. Dell: I note my hon. Friend's remarks. It would be curious if the Government could not have a policy in these areas.

Mr. McCrindle: If it turns out that the previous Secretary of State was acting ultra vires, what consideration will be given to paying compensation to Laker Airways? In the meantime, will the right hon. Gentleman undertake that in the review of the Bermuda Agreement the whole concept of Skytrain will be put forward by the British side? Is the right hon. Gentleman sure that there are no other aspects of the civil aviation review which are ultra vires? Otherwise both British Airways and British Caledonian might be spending millions of pounds needlessly.

Mr. Dell: I have already said that the judgment of the learned judge calls into question many important aspects of the guidance given by my right hon. Friend last February. This raises the question whether it would be right to appeal. That is prefatory to all these other questions.

Mr. Dalyell: Are there many other countries, if any, where this kind of decision is taken in the courts?

Mr. Dell: I think that there are many other countries, and rightly, where the decisions of Ministers can be adjudicated in the courts. I obviously have no objection to the rights of citizens being upheld in the courts. However, in many cases there is uncertainty about the law. Decisions made by lower courts are changed. It may be necessary to establish in this case that the judgment of the learned judge is in accordance with the law.

Mr. Dykes: The right hon. Gentleman has made an admission of a prima facie misuse of powers by the relevant Minister. Will he also concede that there are a number of very unwelcome monopoly aspects of the way in which IATA functions, to the detriment of independent operators such as Laker Airways? Will the right hon. Gentleman reconsider the matter in the context of his inevitable admission that he will now have to reconstruct the whole of the aviation policy?

Mr. Dell: I am in no way accepting that there was prima facie a misuse of power. My right hon. Friend acted in accordance with legal advice that he had the power to give the guidance which he gave. I do not think that the matter of IATA arises under this Private Notice

Question. As the hon. Gentleman knows, decisions about fares are not always in accordance with IATA, even under the present system.

NORTHERN IRELAND (PRISONERS ON PAROLE)

Mr. Powell: (by Private Notice) asked the Secretary of State for Northern Ireland if he will make a statement on the grant of holiday leave to prisoners in Northern Ireland convicted of terrorist offences.

The Minister of State, Northern Ireland Office (Mr. J. D. Concannon): For more than 20 years selected prisoners in Northern Ireland prisons have been allowed to spend a week at home on parole as part of their preparation for release.
To be eligible, prisoners have to meet certain requirements, including the following: they must not have served a prison sentence previously; they must have served at least two-thirds of their time in prison by 30th September.
In fact, 414 prisoners were considered under the scheme this year. Nearly 300 of them were judged unsuitable or were unwilling to take part. These included nearly 100 special category prisoners who were not considered to be close enough to the end of their sentences and 88 who were ruled out because of their behaviour in prison or the risk they represented to the general public.
So far 46 prisoners have been paroled and returned to prison. Altogether 23 are on parole at present.
No male Provisional IRA prisoners are taking part. So much for the headlines and some of the public utterances by people who should know better! Moreover, if any prisoners are known to have been involved in prison disturbances, they will not be allowed to go on parole. If necessary, the scheme could be suspended altogether.
Threats are being made of trouble in Northern Ireland, both in the prisons and on the streets, with the aim of deflecting Her Majesty's Government from their policy of ending new admissions to special category status. Detention is no longer an issue in Northern Ireland,


and just as the Government stuck to their policy on that, so they will stick to their policy on special status for convicted prisoners. The security forces will deal with any eventuality that may arise.

Mr. Powell: Is the Minister aware that my Private Notice Question in no way raised the matter of special status or the Government's policy towards it, which policy is entirely supported by my hon. Friends and myself? Will he convey to his right hon. Friend the fact that the handling of this matter has been a major public relations disaster which once again has blasted the tender plant of confidence in the Government's determination? Who was responsible for the way in which this matter was handled with the media in Northern Ireland? Finally, will the Minister cite the powers under which these paroles are made?

Mr. Concannon: The Department has made special efforts recently to give the general public as full a picture as possible of conditions in prisons in Northern Ireland. I stress that the information given has been purely factual. The release of information governing the leave scheme falls into this pattern. This scheme has been operating for a period of 20 years and has operated without anybody, apart from the people involved, knowing about it. This is another example of the present system of open government.

Mr. McNamara: Is my hon. Friend aware how much we regret the way in which this matter has been handled by the Press since that gives a false impression of the situation in Northern Ireland? My right hon. Friend the Secretary of State for Northern Ireland and his colleagues should be supported in this policy because it indicates the way in which they are getting away from the special category status and are treating all criminals on the same basis.

Mr. Concannon: I repeat that the information given was purely factual. As for the way in which the matter has been reported in the Press, there is no way in which I can influence that side of matters.
As for the question of the powers under which the scheme is operating, I repeat that the scheme has been in

operation for over 20 years and was put into action by one of the right hon. Friends of the right hon. Member for Down, South (Mr. Powell). Those powers are now vested in the Secretary of State.

Mr. Freud: Will the Minister accept that the scheme can be easily misunderstood and is not very selective? Is it not time that there was a proper system of parole in Northern Ireland in which the public in general and prisoners can have confidence?

Mr. Concannon: I repeat that the scheme has been in operation for 20 years. This is the first time there has been any trouble. It is due to the openness of the present government system that these matters have come to light. People have been put on parole for many years, and no one has taken any exception to the system. However, on this occasion the scheme has been treated by screaming headlines, and unfortunately they have got it wrong again.

Mr. Michael Latham: On the subject of a public relations exercise mentioned by the right hon. Member for Down, South (Mr. Powell), will the Minister of State take this opportunity to repudiate any suggestion of an amnesty for convicted terrorists in future?

Mr. Concannon: There will certainly be no amnesty for convicted terrorists. I do not know how the hon. Gentleman spent his Saturday afternoon, but mine was spent in the Maze Prison telling people exactly that.

Mr. Neave: Is the Minister aware that what gravely concerns us is that this incident follows a week of serious disorders in the Province? Is there not a serious danger that this will be interpreted as yet another sign of weakness in Government security policy at a time when the death rate is the highest for three years?

Mr. Concannon: Since this scheme has been in operation since 15th July, I hardly think that it has anything to do with the present situation. A total of 45 prisoners have already been let out on parole and they have come back. We have not lost one. Therefore, this scheme has had no effect on the overall policy, and I think that everybody in Northern Ireland knows that full well.

PARLIAMENTARY DEBATES (SELECTION OF AMENDMENTS)

Mr. Arthur Latham: On a point of order, Mr. Speaker. I have already intimated to you that I wished to ask you to rule on two points and to submit the contents of this point of order to the Procedure Committee.
The first point relates to today's debate and to the votes at 10 o'clock. You will recall that at one time it was thought that the debate on the announcement about public expenditure made by the Chancellor of the Exchequer might have been taken on a Government motion to which there would have been an opportunity for the Opposition to table an amendment. You are aware that in that event there would have been representations to you, as on two previous occasions, arguing the case for the calling of a second amendment.
On Thursday last, my right hon. Friend the Leader of the House announced that the debate would take place on an Opposition motion and that it was unlikely that the Government would table an amendment. Therefore, it then seemed possible that 70 Labour Back Benchers would be able to avail themselves of the opportunity to submit an amendment to the Opposition motion. As you know, Mr. Speaker, half-a-dozen Labour Members came to see you last Thursday night to press the case for the calling of a second amendment. In that situation that would have been within your discretion, although it might have competed with other amendments from minority parties in the House.
In the event, there now appears on the Order Paper, in the name of the official Opposition, a motion which is understood to be virtually unamendable. That means that an opportunity to table an amendment has been lost by 70 Labour Members. I understand, Sir, that by percedent and indeed by specific reference to "Erskine May" you are unable to call the Back-Bench amendment. Will you confirm this and give reasons for that decision? Will you consider referring the situation to the Procedure Committee so that they may take these matters into account and also consider the general

policy about the Chair calling second amendments?
The second point which I wish to raise relates to Standing Order No. 18(10) in the context of outstanding amounts to be granted from the Consolidated Fund. That Standing Order makes provision for a Member to give notice of objection to a class of expenditure. It was at one time thought possible that the 70 Labour Members who will be unable to promote their own amendment might have been able to divide the House and to express a view in the Division Lobby, or to raise an objection tonight to the first of the 12 Defence Votes. However, I now understand that it is being argued that notice must be given on the Order Paper, and therefore that means that it would not be possible for the Chair to accept an oral objection in the Chamber or written notice.
May I invite you to rule on that matter, and also to consider whether the position should be examined by the Procedure Committee? It would appear that the rules of the House in this instance, whether deliberately or otherwise are designed more to frustrate than to permit the expression of Back-Bench opinion. Some of us feel that the present situation is extremely unsatisfactory.

Mr. Speaker: The hon. Member was good enough to give me notice this morning that he would raise this question. It is an important question. From time to time the occupant of the Chair is in difficulties about the selection of amendments, especially when more than one minority party—apart from minority groups—table amendments. I shall welcome consideration of this matter by the Select Committee on Procedure.
I ought to make it clear that there was one little slip in what the hon. Gentleman said. I would not have had the right to call a second amendment today. That firm rule holds good unless there is a motion on the Order Paper so entitling me to do.
With regard to Standing Order No. 18, I must tell the House that where it says that notice must be given it means notice to the House and not to me and it therefore must appear on the Order Paper.

PARLIAMENTARY FACILITIES (USE BY STRANGERS)

Mr. Speaker: Last Thursday the hon. Member for Keighley (Mr. Cryer) raised a point of order with me about strangers using certain facilities in the House. He asked me to look into the matter. I have discussed the issue with the various authorities in the House and I am of the opinion that it is a matter that ought to be considered by the appropriate Committee. No doubt the Leader of the House will look into that.

Mr. Cryer: May I say, Mr. Speaker, that I am most grateful to you for the serious way in which the matter which I raised on a point of order has been investigated. This is an issue of great seriousness and I hope that you will be able to use your persuasive powers to get the Committee to examine this as a matter of urgency and not simply put it to one side because we are approaching a recess.

SOUTH AFRICA (MRS. SUE RABKIN)

Mr. Freud: I beg to ask leave, Mr. Speaker, to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely
the incarceration of Mrs. Rabkin, held incommunicado in Cape Town.
On Wednesday afternoon of last week Mrs. Sue Rabkin, a British citizen, was arrested in her house in Cape Town. She was six months' pregnant. She already has a two-and-a-half-years-old child. She is a British citizen in that she was born and educated in England. Five years ago she met a South African student at university, whom she married and with whom

she has since been living in Cape Town, although she has retained her British nationality and has never remotely considered taking the nationality of any other country.
Since last Wednesday afternoon, despite her mother's journey from London to Cape Town to try to see her, her mother, the Consul in Cape Town and the British Ambassador in Pretoria have had no information regarding her whereabouts or her well-being. I consider that this situation is sufficiently grave and is one that should be debated in the House without further delay.

Mr. Speaker: The hon. Member for Isle of Ely (Mr. Freud) gave me notice before twelve o'clock that he was to raise this matter. He seeks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that should have urgent consideration, namely
the incarceration of Mrs. Rabkin, held incommunicado in Cape Town.
As the House knows, under Standing Order No. 9 I am directed to take into account the several factors set out in the Order but to give no reason for my decision. I have given careful consideration to the representations which the hon. Gentleman has made, but I have to rule that the hon. Gentleman's submission does not fall within the provisions of the Standing Order, and therefore I cannot submit his application to the House.

BUSINESS OF THE HOUSE

Ordered,
That, at this day's Sitting, Proceedings on the Cromarty Petroleum Order Confirmation Bill, set down for consideration at Seven o'clock by direction of the Chairman of Ways and Means, shall, instead of being considered at that hour, be considered at Ten o'clock, and may be proceeded with, though opposed, until any hour.—[Mr. Graham.]

Orders of the Day — SUPPLY

[29TH ALLOTTED DAY]—considered

PUBLIC EXPENDITURE

Mr. Speaker: Before I call the Minister formally to move his motion, I make this appeal to the House. There are more than 40 right hon. and hon. Members who have indicated their wish to participate in this debate. I know from long experience that it will be impossible to call them all. If hon. Members try to exercise self-discipline and make shorter speeches, I shall be able to call more speakers than would otherwise be the case.

Civil Estimates 1966–67

CLASS III VOTE 4, ECONOMIC AND FINANCIAL ADMINISTRATION: TREASURY

Motion made, and Question proposed,
That a sum, not exceeding £22,829,000 be granted to Her Majesty out of the Consolidated Fund to complete the sum necessary to defray the charge which will come in course of payment during the year ending on 31st March 1977 for expenditure by the Treasury on the management of the economy, the Paymaster General's Office and certain other services including grants in aid to certain Parliamentary bodies and others.—[Mr. Graham.]

3.55 p.m.

Sir Geoffrey Howe: I beg to move,
That Subhead B1(1) be reduced by £6,500.
The House has already learned something of the remarkable circumstances in which this debate comes before the House. The purpose of the Opposition motion is to halve the ministerial salary of the Chancellor of the Exchequer.
That enables the House for a moment or two to focus its attention on the right hon. Gentleman. He is a man of many faults, as he would be the last person to admit. Even his most critical admirers would not frequently accuse him of false modesty, undue diffidence, or lack of confidence.
Repeatedly, throughout the years when he has held his present office he has urged both sides of the House not to cast away what he is pleased to describe as his successes of the past two years. Even his hon. Friends must frequently have had great difficulty in recognising what successes he was speaking of as they sat wondering what creek they were up and what creek the Chancellor was about to paddle them up with enthusiasm in the next few moments.

Mr. Russell Kerr: A bit under-rehearsed.

Sir G. Howe: I am sufficiently well rehearsed to know that if the hon. Member for Feltham and Heston (Mr. Kerr) returns to his own country of Australia he will there find people who have had the opportunity and good fortune to return a Conservative Government to office. I hope that we shall soon have the chance of following their example.
Even as recently as Budget time the Chancellor was still proclaiming the duty of the British people to believe in the economic miracle which was shortly to overtake them. He was frequently accustomed to taunt the Opposition, even if we had tabled amendments making our opposition clear, by saying that when we failed to vote out of duty for his Government, we were, in his phrase, sitting on our hands.
It is no longer the Opposition who are sitting on their hands. It is the Chancellor and the Government who are choosing to do so today. The Government are apparently unwilling to bring these measures forward for debate. The truth is that the Chancellor has not only lost his sense of direction, but seems also to have lost his nerve. It is interesting to try to work out when this process of disintegration began to take place.
If we return to the public expenditure debate of 9th and 10th March, the Chancellor will remember only too well what happened at the end of that debate. When the motion tabled by the Government to approve their public expenditure White Paper was put to the House, 40 of his hon. Friends refused to support the Government. On the following day the Government scrambled back to


security by bringing a vote of confidence before the House, thereby giving a totally new meaning to the word "confidence". Within a day or two thereafter the then Prime Minister, not uncharacteristically, chose that moment of glory to resign his high office. [HON. MEMBERS: "Where is he?"] The former Prime Minister does not have a seat in the House any more.
Since then the Chancellor has gone through periods of increasing disquiet and doubt and has displayed increasing anxiety symptoms. Before he decided to run in the race—if that is what we may call it—for the leadership of his party, he hesitated for two or three whole days. In retrospect his hesitation was well justified.

Mr. Robert Mellish: rose—

Sir G. Howe: So we—

Mr. Mellish: rose—

Mr. Speaker: Order. The right hon. Member for Bermondsey (Mr. Mellish) has been here long enough—indeed, as long as I have—to know that if the right hon and learned Member for Surrey, East (Sir G. Howe), whom I have called to address the House, does not give way, he must still have the Floor.

Mr. Mellish: Will the right hon. and learned Gentleman give way?

Sir G. Howe: No.

Mr. Mellish: Why not?

Sir G. Howe: I have hardly started my speech. Normally I am very willing to give way to the right hon. Gentleman, but not now.
So we come to the next point of the rather hesitant record of the Chancellor of the Exchequer. Apparently he once had it in mind to stand for the treasurership of the Labour Party, but for that he hesitated a number of weeks and very prudently decided not to run in that race at all.
During the months which have passed we have seen a change taking place also in what the right hon. Gentleman brings before the House. During his first two years or so he brought Budgets or budgetary statements before the House on

about six occasions, so that about once a quarter we were accustomed to see him bringing new measures before us. But since this Budget, which was meant to bring about an economic miracle, not a month has passed without the right hon. Gentleman coming back to the House with some new statement, announcement, or piece of glory. It is interesting to see how well each of those has gone.
The Budget at the beginning of April followed on the public expenditure debate. Between the public expenditure debate and the Budget the pound had lost 9 cents in its value. From the Budget to the announcement of the pay deal, hastily cobbled together by people who saw themselves on the edge of the abyss, another 4 cents had fallen off the value of the pound. The right hon. Gentleman came along then saying that we should regard ourselves as the envy of the world and that other countries would give their eye teeth to endorse this tremendous success.
Unfortunately, the world did not see it like that. By 6th June the pound had gone down by another 8 cents to $1·72, and the right hon. Gentleman came to announce his standby credit—a "vote of confidence" by world bankers in his management of the economy. That again has not quite struck the world in that way. It is true that the pound has risen by about 6 cents since then, but it is still 6 cents below what it stood at at the time of the Budget. We know also, although the right hon. Gentleman will tell us no more, that a substantial part of the standby credit has already been drawn upon in defence of the pound.

Mr. Nicholas Ridley: How much?

Sir G. Howe: I asked—and the Chancellor has proved curiously reluctant to say—how much of that standby credit had been spent.
Then within six weeks of that we had the announcement of this fresh round of cuts which we are debating today, and the pound remains unchanged. Meantime, it is worth looking—[Interruption.]

Mr. Speaker: Order. Interruptions from a sedentary position make it almost impossible for any hon. Member to give a coherent speech. I hope that hon. Members will allow the right hon. and


learned Member for Surrey, East to be heard.

Mr. Eric S. Heller: On a point of order, Mr. Speaker. I apologise for making an interruption from a sedentary position. What I said was that the right hon. and learned Gentleman's speech was a most irresponsible one.

Mr. Speaker: And, what is more, the hon. Member for Liverpool, Walton (Mr. Heifer) has been here long enough to know that that is not a point of order.

Sir G. Howe: There is no part of the House from which lectures in irresponsibility come with less conviction than from that Bench below the Gangway.
Meantime, we can look at the Government's attitude to the House. The Prime Minister proclaimed not many weeks ago, with great pride and with his chest thrown out, that he intended to govern on Labour votes. That was his boast. Yet when we came to consider the White Paper setting out stage 2 of the pay policy all that we had was a motion to take note of the paper. In view of what was said by Government supporters sitting below the Gangway on that occasion, that was not altogether surprising.
Now, on this package, whose importance is not in doubt and which represents a reversal of the declared intentions of the Government, stated and restated on many occasions, and which involves budgetary changes of more than £1,800 million—more than the Chancellor of the Exchequer has given away or raised in extra taxes in any one of the many Budgets that he has introduced—surely we were entitled to expect the Government to ask the House to debate their measures. Indeed, we were so led to believe. Hon. Members on both sides of the House were expecting such a debate until we heard on Thursday morning that the Cabinet had announced that it had no such intention.
We ask ourselves why on earth not, and we find the answer in Early-Day Motion No. 565 on public expenditure cuts, a motion in the name of the hon. Member for Paddington (Mr. Latham) and 81 other hon. Members, flatly denouncng the Government's policy as set out in these public expenditure cuts.

Mr. Arthur Latham: Will the right hon. and learned Gentleman give way?

Sir G. Howe: Yes. I will give way to the hon. Member for Paddington.

Mr. Ridley: On a point of order, Mr. Speaker. The hon. Member for Heston and Feltham (Mr. Kerr) is again interrupting from a sedentary position shortly after your recent rebuke, as he has throughout my right hon. and learned Friend's speech. If hon. Members continue to behave like this, reasoned debate becomes impossible.

Mr. Speaker: I know that this is the last week before the recess. At the same time, a very serious point has been raised. It is a serious matter that there are some hon. Members who seem to think that they have a right to conduct a running commentary during another hon. Member's speech. It is quite unfair and unworthy of the House.

Mr. Arthur Latham: The right hon. and learned Member for Surrey, East (Sir G. Howe) has just referred to the Early-Day Motion in my name. Will he also turn his attention to the Opposition's motion? Since he is critical of the Government for not tabling a motion, can he explain why the Opposition have deliberately avoided a motion making any reference to public expenditure cuts and denying those Government supporters below the Gangway who are critical an opportunity to express a distinctive point of view and to vote upon it? If the Government have sidestepped, the Opposition have run away.

Sir G. Howe: The hon. Gentleman's point requires this answer. We intended and wanted to have a debate on our motion and to vote on our motion. The only way in which we could do that was by tabling this motion. Otherwise we should have been faced by an amendment from the Government and we should have been obliged to vote on that.
If the hon. Member for Paddington has any complaint about his lack of opportunity to table an Amendment, it is a complaint which lies against his own Ministers. It was they who could have and should have tabled a motion on which he could have voted. The reason why they have not done so is that the


Prime Minister knows that most members of his party outside his Cabinet and Government Ministers are harshly critical of Government policy and that the great boast of depending on Labour votes to carry his policy through Parliament has vanished like a puff of smoke in the face of the Early-Day Motion. It is a very strange way of depending upon Labour votes.
When the Chancellor made his statement I made it clear that we welcomed it. We do, as far as it goes, because it represents a belated partial recognition of a part of what is wrong with their policy and their economy and a partial recognition of the necessity to do some of the things that we have urged to put the economy right. But, like British industry outside this House like the rest of the world and like the Chancellor's creditors, we can have no confidence that the little the Chancellor has done will serve to put matters right.
His proposals are inept and inadequate. They come too late. They are bogus and may never happen. Above all, they are totally out of balance in imposing far too large a share of the burden which has to be borne not upon the public sector but upon the private sector. They do not do what should be done and they will do a great deal of damage which ought not to be done. Above all, they cannot be regarded as part of a coherent long-term strategy.
I want to tell the Chancellor of the Exchequer what that strategy should be. [HON. MEMBERS: "More unemployment."] Hon. Members below the Gangway may shout about more unemployment. Let them harken to the unemployment that these measures will create. Let them recognise that there is no escape from the disastrous situation into which the Chancellor has got us without rising unemployment.
First, the Chancellor should recognise that he and the Labour Party must make —they have so far not done so—an unqualified commitment to making the mixed economy work as such. Some members of the Cabinet undoubtedly want that to happen, and they say so. The Secretary of State for Prices and Consumer Protection said so the other day. But the Secretary of State for Energy, for example, wants no such thing.
If we harken to what is said by many hon. Gentlemen below the Gangway, it is clear that about half the non-Government membership of the Parliamentary Labour Party do not want the present mixed economy to work. They are more intent on overthrowing and destroying it. Until the Labour Party resolves that conflict at its heart, there is no prospect of getting good government from a Labour Government.
Secondly, there must be a determination on the part of the Government that the nation and the Government will live within their means. That is the importance of the size of the public sector borrowing requirement. There are other technical matters. It is not just the crowding out of the private sector that is important—although it is—the growing difficulty to the Government of borrowing what they need to borrow and the threat of inflation that poses—although that is important—or the interest rates that have to be paid by the private sector. The simple dominant overriding fact is that, as the Prime Minister has said on more than one occasion, no Government can go on borrowing £1 out of every £4 that they are spending. The day of reckoning is bound to come.
That is why we are deeply suspicious of the Chancellor's plans to replace the by now familiar public sector borrowing requirement with this new animal that he is busy manufacturing in his menagerie —the general Government financial deficit. For those who have not been following these fascinating matters as closely as the rest of us have, I should explain that the Chancellor is seeking to redefine the measurement of his borrowing requirement by excluding from it the capital that is borrowed by the nationalised industries and the loans raised and advanced by the Government to the private sector. Because the nationalised industry sector is so large, that has the effect of halving the public sector borrowing requirement—diminishing by a stroke this disturbing borrowing requirement burden and reducing it by a half. I can hardly believe that the Government, in seeking to redefine their statistics in that way—

Mr. Ron Thomas: Will the right hon. and learned Gentleman give way?

Sir G. Howe: —I will shortly—are simply concerned with the promotion of economic scholarship. I suspect that the Government, in seeking to make that re-definition—who can blame them in the light of this record—are out to fudge the books.

Mr. Ron Thomas: I thank the right hon. and learned Gentleman for giving way. Will he explain to me why if ICI borrows £100 million for capital investment that is applauded, but if the public sector does that he feels that it ought to be included in the public sector borrowing requirement, with all that that implies in the rest of his deliberations?

Sir G. Howe: Because on either side it must be recorded in the balance sheet and our creditors must decide, by studying the balance of the economy, whether the company or the country is creditworthy. ICI is creditworthy. This country manifestly is not.
Thirdly, we ask the Chancellor plainly to recognise, as the Prime Minister said in his first broadcast to the nation, that living within the nation's means inescapably means lowering living standards. How can the Government's record and commitment in that respect be creditable when we look at what they have been doing about food subsidies and school meals? They introduced food subsidies and, in their first heyday and pursuit of re-election, allowed them to soar. Last year the news was that they were to be cut. But, at the time of the pay deal announced in July 1975, that commitment was cancelled.
School meals charges were to be raised this September to begin restoring balance to that part of the economy. But that commitment was cancelled in this year's Budget. Now food subsidies, according to the statement last week, are to begin coming down at a faster rate. But how far can anyone believe that will happen?

Mr. Michael English: Will the right hon. and learned Gentleman give way.

Sir G. Howe: Not at the moment. Looking at the document produced from Transport House last week—known as the Social Contract Mark II—we find that, within a week of the Chancellor

proclaiming his intention to reduce food subsidies more rapidly, that document, cobbled together between Ministers, the trade union movement and the national executive of the Labour Party, states:
The Liaison Committee reasserts its belief in the value of subsidies in helping to keep down the price of essential goods. … As part of its continuing review of public expenditure the Government should therefore
—mark these weasel words—
eriously reassess the shape and content of its food subsidy plans.
How can any creditor have any confidence that the Chancellor means what he says when he says that he will begin clawing back food subsidies more quickly next year?

Mr. English: Does the right hon. and learned Gentleman realise that the Shadow Cabinet could agree with the words that he has quoted because, only a few weeks ago, they did not oppose the food subsidies Order? They merely suggested that the sum—the shape and content—should be different. The Government's majority at the beginning and end of that day was 40, and on that issue it was five. But the Opposition chose not to oppose the food subsidies Order. I suggest that the right hon. and learned Gentleman should ask himself whether that was done to reconcile internal contradictions within the Shadow Cabinet.

Sir G. Howe: We made our position clear in that debate and in others. We want an early reduction in food subsidies. The Chancellor has told our creditors that he also wants that. Yet he appears to be prepared to go along with this document which means all things to all men. That is no way to command confidence among our creditors.
Fourthly, we want a plain recognition —it is this towards which we are groping in the statement that we are debating—that public spending as a whole is massively too large and must be steadily, courageously and tenaciously reduced, not just by bits and pieces, but as part of a settled long-term strategy to restore the balance of the economy. What is needed—what we have not got—is a clearly announced programme for the reduction of the borrowing requirement over the next few years. We need similar resolution over the money supply.
But how can we expect that when we are dealing with a Chancellor who,


throughout months and years, has denounced every suggestion for public economy and fiscal sense of that kind as cruel folly? How can we expect convincing programmes in that direction from a Government in which almost every member, including the Prime Minister, takes every possible opportunity of proclaiming belief in the virtue of public spending for its own sake?
When we listen to speeches made by the Prime Minister and the Chancellor we recognise that they cannot wait to get back to their old big spending habits. Last week's statement is regarded by them as at best a temporary awkward interruption in the rake's progress to which they have become accustomed. Is it any wonder that Labour-controlled local authorities, which are being urged by the Secretary of State for the Environment to cut back on public spending, go on spending as though money were still available without limit? They are practising only what the Chancellor for all too long has preached. How can they be blamed if they go on doing it?
How does the Chancellor propose to control the over-spending by local authorities? While many Conservative-controlled authorities are making tremendous efforts to cut back on expenditure in accordance with the Government's instructions, Labour-controlled authorities go on spending as though the Chancellor's policies do not matter at all. How can that carry any conviction?
How can businessmen, who have been pruning their expenditure programmes to the bone and seeing people laid off as jobs disappear, have any confidence in the Government's record? The number of jobs that have disappeared altogether since this Government came into office is 1,070,000. There are 1,070,000 fewer jobs than in March 1974. There is only one exception to that trend. That is, as the Chief Secretary recently said, in the public sector in central Government and in local government. While more than one million jobs have disappeared, 158,000 people have been taken on to the public sector payroll. Therefore, for every seven jobs lost in the private sector, in manufacturing and trading industry, one job has been created in the public sector. How can one accept the Gov-

ernment's commitment to cut public spending if that goes on?
Above all, the Government must give a clear commitment that they will take action to encourage the growth and to restore the dynamic of the tradable private sector. I would not quarrel with the estimate that 1 million new jobs are needed in the private sector, but how does the Labour Party suppose that they will come into existence? What is the Labour Party doing to make them come into existence, to generate the capital that will create new investment so that new jobs can happen?
The Labour Party does not know or understand the answer to that question. Half of its members, on their good days, at least mouth a commitment to the creation of vigorous, profitable private industry. They do not do very much about it. [Interruption.] The other half—

Mr. Peter Tapsell: On a point of order, Mr. Speaker. Despite your two appeals to the hon. Member for Feltham and Heston (Mr. Kerr), he is still maintaining a running commentary from a sedentary position.

Mr. Russell Kerr: Further to that point of order, Mr. Speaker. It was quite unintentional. I had just heard some most grievous nonsense and, unfortunately, I was provoked.

Mr. Speaker: Order. I hope that the hon. Gentleman will not be provoked any more, because it is not fair to hon. Members who are addressing the House to have these interruptions from a sedentary position.

Sir G. Howe: As I was saying, the other half of the Labour Party, the half represented—sitting down or standing up —by hon. Members below the Gangway, have been all their lives denouncing investors and industry for lack of patriotism, pointing to investment overseas and talking with foolish phrases about an investment strike. The question that they ought to ask themselves is why companies that have the opportunity of investing in this country or overseas choose to invest overseas rather than here. They do not choose, of course, to invest in the Soviet Union [An HON. MEMBER: "Why?"] I shall tell the House why. They choose to invest in other countries


rather than here because they know that elsewhere they can get a good profit and a fair return on their investment, and they know that their management and skilled work people who go overseas to work will get reasonable pay and will not be clobbered by penal taxation of the kind that commends itself to Labour Members.
The only reason why companies do not invest more here is not that they are staging an investment strike, but that the philosophy and attitude of the Labour Party have combined to create an investment lock-out. Labour policies have created an investment lock-out which makes it very difficult for people to invest here with confidence. Those are the standards by which the House should judge the latest package.
While we can regard what the Chancellor has announced as no more than a first reluctant step in the right direction, the cuts themselves, a reduction of more than £1,800 million in the borrowing requirement altogether, should be set alongside the fact that there has been a £344 million increase in public spending since the White Paper was introduced. If we consider them as public expenditure cuts, we find that they are very largely an optical illusion. Only £550 million of these cuts actually represent a reduction in the resources of manpower, goods and services absorbed by Government. If we count in the payroll tax as well, we find that £1,300 million of the £1,800 million that the Chancellor is seeking falls upon profits, incomes, spending, production and jobs in the private sector. Only an Irishman could describe that effecticely as cutting deeply into the public sector.
The cuts are concentrated, moreover, very largely on capital expenditure. They leave the bureaucracy unscathed. Of the £550 million falling on resources of the public sector, only £136 million comes out of the current account and a large part comes in reductions in the capital spending programmes of the nationalised industries. That is not a very sensible choice when one considers the problems facing the steel industry. If that is a choice that must be made, why in heaven's name should the capital spending programme of the British National Oil Corporation be immune from cuts when that is the one sector in the public sector for which private money would

be available to do anything required? We suspect that the exemption for the BNOC is far too high a price to pay for the sullen, reluctant presence in the Cabinet Room of the Secretary of State for Energy.
We are deeply concerned as well about the proposed cut of £100 million in defence expenditure. A Government who are prepared to cut at this stage another £100 million off the defence budget while at the same time spending £25 million on aid and sustenance to terrorists in Mozambique are not a Government who deserve the support of this House. If the Government say "Where else should expenditure be cut?", I say that the answers cry out to anyone who approaches this question and who is not dominated by politics first and last.
Where is the sense in cutting the capital spending of the National Health Service by £20 million while spending £40 million on abolishing pay beds in that service? Where is the sense in cutting expenditure on the education budget by £30 million while spending the same amount on extinguishing our grammar schools? Where is the sense of adding £900 million to the burdens on industry while borrowing and intending to use the same amount on the nationalisation of land, aircraft and shipbuilding? Where is the sense in cutting the general aid to industry in the regions while planning to increase selective spending by the National Enteprise Board and other agencies?
The real area of neglect in Government spending which the Chancellor has still to tackle is that over which he presided in 1974–75. In his first Budget he set out to achieve a borrowing requirement of less than £3 billion, but at the end of his first year at the Treasury he came back to report a borrowing requirement almost £5 billion larger, and there was a huge explosion of public sector pay and payrolls and a huge increase in subsidies of over £1 billion. The Chief Secretary only a few weeks ago was saying—we thought hopefully—words to the effect that only 43 per cent. of public sector housing costs were borne by tenants of public sector houses, yet nothing to reduce those subsidies, nothing to reduce that vast increase in expenditure, has been proposed by the Government.
The last feature in the package which causes us concern is what we must call the payroll tax on employment. Let us hear less of this "Newspeak" description of it as the employers' increased national insurance contribution. It has nothing to do with national insurance. A payroll tax could make sense at the right time and if everything else in the tax system were moving in the right direction. That is the situation in which the Chancellor can point to the European parallel. However, in this context a payroll tax alongside a failure to make real cuts, even when the Government are trying it a year ahead, is the most stupid and damaging feature of the whole package.
We cannot help but reflect that Lord Kaldor who was, so we all understand, the architect and designer of the selective employment tax, celebrated his resignation from office as special adviser to the Chancellor at midnight last night. We must regard this payroll tax as represent-Lord Kaldor's last laugh over Denis Healey.
If we look at the declared objectives of the Chancellor in this part of his statement, we find that he was setting out that —I quote from the statement of 22nd July—
Our overriding priority is to restore the prosperity of the British economy through the regeneration of our industry and to provide the essential conditions to bring down, and to keep down, the intolerable level of unemployment. To do this we must ensure that manufacturing industry has sufficient resources available to take advantage of the exceptional opportunities now open to us."—[Official Report, 22nd July 1976; Vol. 915, c. 2010.]
That was his objective. In fulfilment of that objective he takes £900 million out of the coffers of British industry.
What will the effect be? It will be lower profits, less investment, higher prices and fewer jobs. Prices, as the Chancellor says, will rise by 1 per cent. He prefers this to VAT. One cannot imagine why, because the payroll tax will directly add to the cost of food, housing, fuel and transport, all of which would have been exempt from VAT. Of this £900 million, how much will come from profits that would have been available for investment? Above all, how much of it will come out of jobs in the private sector? By how much will unemployment be increased as a result of these proposals?
When the Chancellor made his statement, he said that he expected unemployment to rise by 60,000 as a result of all his measures. But how much larger is the figure of jobs that will be destroyed by these measures? Is it 115,000, as the Secretary of State for Employment was reported to have told the Tribune Group? Is it 150,000, as Mr. Michael Posner, from the Treasury, is reported to have told the Public Expenditure Committee? Whatever the number—and the Chancellor should tell us what it is—almost all will come from the private sector.
It is clear that the effect of the Chancellor's attempt to delay the onset of the recession, which has struck the rest of the world, now means that unemployment in Britain is higher than it is in other European countries. Unemployment in Britain has increased more than in any other country in the European Community. On the Chancellor's own statement, it will go on rising until the end of this year and, on the statement of Mr. Posner to the Expenditure Committee, it will go on rising until the end of 1977. [HON. MEMBERS: "Re did not say that."] Yet the Chancellor is setting about the deliberate destruction of at least 100,000 jobs in the private tradable sector. That is a direct consequence of his failure and refusal, even now, let alone throughout the last two years, to take effective control of public spending.
As for the effects which will arise as a result of what the right hon. Gentleman is doing, we have some pretty impressive forecasts. When selective employment tax was introduced by the Labour Government in 1966, the then right hon. Member for Southwark, later Lord Gunter, said:
In the longer term it has the additional aim of making more manpower available for manufacturing industry by encouraging economy in the use of labour in the services." —[Official Report, 23rd June 1966; Vol. 730, c. 933.]
Lord Diamond, on 25th May 1966, talking about selective employment tax, said:
—"It has been most gratifying to note that only a minority of employers appear to be taking the view that they should automatically pass on the whole of the increased cost and that, therefore, there is no need for them to consider the efficient deployment of their labour."—[Official Report,— 25th May 1966; Vol. 729, c. 481.]
The Government, when the present Prime Minister was Chancellor of the Exchequer, when introducing selective


employment tax, were taking credit for the fact that the tax would reduce jobs and destroy employment and would not be passed on in prices.
It is no wonder that the former Prime Minister, the right hon. Member for Huyton (Sir H. Wilson), when attacking the proposal to have a payroll tax, in 1961 said:
… it would have intensified the depression and the growth of unemployment which was already on the way. The idea amazes me."— [Official Report, 18th April 1961; Vol. 638, c. 986.]
Yet because the Chancellor has failed to take hold of the size of public spending because of this tax that he is choosing to introduce at this time for no good economic reason save that it might be easier to concealing its true nature from his hon. Friends below the Gangway.
Far from switching resources, as the jargon goes, and giving encouragement to industry, the Chancellor has done exactly the opposite. Confidence in industry, a very tender plant, began to come into some form of life about a fortnight after the so-called agreement at Chequers in the autumn of last year. But within a fortnight the Government had repudiated that. Last month they repeated exactly the same performance. There was a well publicised reconciliation after the NEDC meeting—this was to be "the acid test of the Government's good will", Lord Watkinson said—yet within a fortnight the Government had committed a clear breach of the strategy which had been agreed. Every time the representatives of industry have come within range of this Government, the Government have turned round and given them a good hard kick in the teeth. It is a disgraceful and total failure to understand what the duty of Government should be.
On closer examination of this package we find that it only just deserves the guarded welcome which I gave when it was first announced.

Mr. Frank Allaun: On a point of order, Mr. Deputy Speaker. Is it not usual in these debates for the opening speaker to take 30 minutes?

Mr. Deputy Speaker (Sir Myer Galpern): The hon. Gentleman knows full well that there is no time limit upon speeches, even for Back Benchers. How-

ever, one would hope on this particular occasion—I am not referring to the Front Bench speaker—that at least Back Benchers would observe a reasonable time limit.

Sir G. Howe: I have given way a great many times, perhaps too many, Mr. Deputy Speaker.
The package, on further examination, hardly rates better than two marks out of 10, because, from their point of view, working people were persuaded to accept the pay deal on terms that the Chancellor has forthwith set out to nullify by taxing pay, destroying jobs and raising prices. Industry was likewise persuaded to accept the industrial strategy on terms that the Chancellor forthwith has again set out to destroy by reducing liquidity and destroying profits.
No wonder that the people of Britain no longer have confidence in the Chancellor of the Exchequer. No wonder that his policy, as he moved from expedient to expedient, totally fails to inspire confidence among the creditors of this country.
By now it is probably impossible for any Chancellor who may be selected from the ranks of this Government to draw together the totally divided warring factions which make up the Labour Party and to produce an economic strategy which makes any kind of sense at all. Certainly this Chancellor has long since demonstrated that he has not got the capacity to do so, and the time has come for him to go.

4.41 p.m.

The Chancellor of the Exchequer (Mr. Denis Healey): We have just listened to a speech of quite stupefying triviality from the right hon. Member for Surrey, East (Sir G. Howe). It was stupefying except for those many moments when it was being cheap and nasty. It was well suited to the motion which the Opposition have nut down which seems to be more concerned with an aspect of incomes policy than with the measures which I announced the other day.
I shall deal with the speech and the motion later, but I suspect that the House is mainly concerned with the measures which I announced on 22nd July and will want the answer to two questions. First, is the objective at which they aim the


necessary objective, and, secondly, are they rightly constructed to achieve that objective?
As I made clear in my statement on 22nd July, now we know that the economy is growing faster than I expected at Budget time, it has become essential to ensure that the public sector borrowing requirement comes down sharply as a share of our gross domestic product. The target which I have set, in the light of the prospects as I now see them, is that it should fall by a third in the year from April 1977 compared with the current financial year. In money terms this would mean a PSBR of about £9 billion. If we take as a measure of our fiscal deficit the general Government financial deficit, which is directly comparable with the measure used by most other countries, then we should be cutting the share which it takes of our GDP by a half. These reductions are in line with those planned by our major competitors like the United States and Germany.
The mixture we have chosen, of reductions in public expenditure amounting to just over £1 billion and an addition of two percentage points to the employers' national insurance contributions amounting to about £900 million in the next financial year, ensures that this will be achieved in a way causing relatively little damage to output, employment and the price level. By the eud of next year the economy is still likely to have grown faster and unemployment to be lower than we expected at Budget time last April. Moreover the measures will not begin to affect employment until the middle of 1977, when the peak of unemployment will be far behind us.
It had become necessary to aim at this adjustment in our earlier plans as we warned it might in the Counter-Inflation White Paper two months ago, in order to avoid excessive strain on our productive capacity and to ensure that financial constraints on manufacturing industry do not stop our recovery in its tracks.
With great respect, I do not need lectures from the Front Bench opposite on this matter. It is above all the practical example of fiscal and monetary profligacy which they set when they were last in power which is the conclusive argument for what I have done now. If I may quote Mr. Freeman, of the OECD

Economic Department on the BBC the other day:
Britain now has the best opportunity since the Second World War to achieve … export-led growth … The important thing this time is to ensure that public and private consumption don't get out of hand. This is what happened in 1972 and 1973 and this limited the scope for investment and exports This time round exports are leading the recovery and we hope that investment will soon start to pick up.
Those were his words, not mine.
The truth is that the policies of the Opposition, when they had the power to practise what they preach, led to such overheating in industry that production seized up completely in 1973, the balance of payments deficit was rising at a terrifying rate when they left power, and the country was moving into the hyperinflation which the present Government have now brought under control.

Mr. Peter Hordern: The right hon. Gentleman will appreciate that his analysis of the monetary position is extremely important and will be widely read. Has he recognised that the general Government deficit to which he refers is about half the size of the public sector borrowing requirement, as my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) said, but he is comparing next year's Government deficit with the current year's deficit of the leading countries, and the present general Government deficit is twice that of the United States and of Western Germany and is 50 per cent. higher than that of France? Further, as for expansion of the money supply, is not the right hon. Gentleman aware that the expansion of M1 far exceeds the rate of increase in M1 during the last Conservative Administration's period of office?

Mr. Healey: The hon. Gentleman is wrong on all points. I advise him to read the article in the latest Economic Survey, which shows that in this year the general Government financial deficit in Western Germany is quite substantially higher as a percentage of GDP than in Britain and the United States deficit is only just a little lower, although, I concede, that of France is substantially lower. But the point is that Germany and the United States, which have deficits comparable with ours, are planning cuts in the deficit between this year and next year


of roughly the same size as we are now planning. The hon. Gentleman must know that to be true.
I believe, Sir Myer, that the measures which I announced on 22nd July—

Mr. Deputy Speaker: Order. One or two hon. Members have been addressing me by name. My wife is in the Gallery, and I do not wish her to know that I am here. Perhaps right hon. and hon. Members will address me as Mr. Deputy Speaker.

Mr. Healey: We all note your wise and prudent words, Mr. Deputy Speaker.

Mrs. Barbara Castle: Before my right hon. Friend leaves his present analysis, will he answer one question? He referred earlier to unemployment. What is his current forecast for the level of unemployment by the end of 1977?

Mr. Healey: I shall deal with unemployment at some length later, if my right hon. Friend will allow me.
I believe that the measures which I announced on 22nd July, added to the measures we had previously taken to limit domestic demand, will enable us to maintain steady and continuous progress towards full employment without refuelling inflation and without producing a balance of payments deficit which would compel us, as so many Governments have found themselves compelled in the past, to slam on the brakes just as recovery is getting under way.
Financing arguments further strengthen the case for reducing our fiscal deficit. At the present time, when the recovery in output is not yet reflected in a fall in unemployment, it makes good economic sense for us, like other countries, to accept an exceptionally high PSBR. We have succeeded in financing it without denying funds to industry and without printing money, because industry has been borrowing little from the banks and people have been saving an exceptionally high proportion of their income.
Now that recovery is under way, there are signs that the savings ratio has begun to fall somewhat and industrial borrowing is picking up. Further evidence of the improving prospects is given in today's Financial Times. The paper's July survey

of business opinion shows a balance of companies now expecting to employ more labour in the next 12 months and a marked increase in companies expecting to invest more in plant in the same period. Therefore, we, like others, must bring our PSBR down to a normal level over the next three years. Otherwise, we shall be unable to finance it without either raising interest rates to a level at which industry cannot afford to borrow or printing money, as our predecessors did, with the appalling consequences from which we are only just emerging.
Again, I do not need lectures from the Opposition Front Bench on controlling the money supply. Under their Administration, M3 rose 26 per cent. in 1972 and 28 per cent. in 1973. I have kept its growth to under half those levels. As I told the House in my statement, M3 has been growing at an annual rate of about 10 per cent. so far in this financial year. Over the year as a whole, it should grow about 12 per cent., a level fully consistent with our objectives for reducing inflation, and if inflation and output move as now forecast, I should expect the growth in money supply to be lower next year than this. If I consider that the money supply is growing too fast, I shall take whatever steps are most appropriate to reduce its growth.

Mr. Tapsell: The right hon. Gentleman is comparing the rate of expansion in M1 and M3 in 1972 and 1973 with more recent periods of industrial stagnation. Would it not be fairer to point out the rate at which industrial production was increasing during those two earlier years?

Mr. Healey: In 1973 industrial production did not rise at all. As I have pointed out many times in the House, overheating in the economy due to profligate increases in the money supply and profligate Budgets in 1972 and 1973 produced a total seizure in the economy in 1973. The hon. Gentleman watches these matters carefully. If he looks at the statistics, he will find that that is so.
No one on the Government side can feel happy about the need to make these reductions in public expenditure. We do not regard public expenditure as a crime—I accept the strictures which the right hon. and learned Member for Surrey, East laid on me in this particular regard—but I do not believe that


there is any alternative policy which would have made them unnecessary, given the rate of growth of manufacturing output which we must achieve if we are to get unemployment down to 3 per cent. in 1979.
Those who quote economists from the Cambridge Economic Policy Group to justify the introduction of large-scale import controls should recognise that those economists argue for even greater reductions in the fiscal deficit than I do. I gather that the author of the paper to the General Sub-Committee of the Expenditure Committee last week suggested that, cuts in the fiscal deficit should be made in this financial year when unemployment is still rising, and his colleagues in the Cambridge Economic Policy Group in their March report argued that under their policy of protection, fiscal action through increases in taxation or cuts in public expenditure amounting to £3,000 million in all would have been needed in 1977. Indeed, it should be obvious that since demands on domestic output are increased by excluding imports and there are physical limits to the rate at which output can expand, the potential increase in domestic demand could only fuel inflation and divert exports to the home market unless special fiscal measures were taken to offset it. I hope, therefore, that none of my hon. Friends will argue that import controls are a soft option as regards public expenditure and the PSBR.
As it is, since recovery is proceeding somewhat faster than we expected in April, some fiscal action to reduce the deficit next year had become essential on any hypothesis. I believe that the particular mix of reductions in public expenditure and increases in taxation which I have chosen was the least damaging that could be devised if we want to preserve our social and economic priorities.
Too often, when such measures have been necessary in the past, Governments have chosen to make indiscriminate percentage cuts across the board. We have not. We have left completely untouched the main social benefits, such as pensions. We have not cut current expenditure on schools or the sick. We have not cut as much as £1 off the programme for

aid to those less fortunate than ourselves in the Third World.
But this does not mean that we have gone back on our commitment to give priority to the needs of manufacturing industry. We have actually increased our provision for industrial training, and my right hon. Friend the Secretary of State for Employment in the next day or two will be announcing a number of further measures to deal with unemployment, especially among young people. Within our industrial programmes as a whole, we are making some reduction in automatic aid to industry in favour of selective aid. I believe that this will be welcomed much more widely than some hon. Members opposite may believe. Indeed, I notice that the Chamber of Commerce and Industry in Leeds, part of which city I have the honour to represent, has argued that there should he no further addition to regional incentives and for a tapering off of the present system. It said:
A more selective approach is required",
and it pays special tribute to the selective approach under Section 7 of the Industry Act 1972, saying that the Department of Industry has administered its responsibilities in Yorkshire and Humberside extremely well. I agree. I think that the right hon. Member for Sidcup (Mr. Heath) and the whole of the Opposition Front Bench, in so far as its members were in his Government, deserve credit for providing the present Government with the powers for selective intervention in industry, even if the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) does not agree.

Mr. Heffer: My right hon. Friend has quoted with approval the Leeds Chamber of Commerce. Will he note that the construction employers and construction unions have also issued statements to the effect that the cuts will be absolutely devastating for the construction industry and that they will lead to greater unemployment among construction workers? The fact that the cuts will lead to further unemployment in the industry is, in my view, a condemnation of them.

Mr. Healey: I understand very well my hon. Friend's deep concern about the effect of the measures on employment in the construction industry, particularly as he is a member of a trade union in


the industry. I shall come later to the point which he has raised. I shall not deny at any point in my speech that all the measures which I have taken will have some painful effects for somebody. All I am seeking to argue is that, given the need to cut the PSBR next year, because output in manufacturing industry is growing so much faster, there was no other mixture of measures which would have done so little damage as the set of measures I have chosen.
When the Public Expenditure White Paper is published, the Government will be showing the increased provision to be made for programmes for selective aid to industry, both through the Department of Industry and through the National Enterprise Board. These increases will be provided either out of the contingency reserve or from offsetting savings in other parts of the industry programme.
In the industrial field, the other main saving is the reduction of £157 million, or under 5 per cent., in the planned capital expenditure of the nationalised industries other than the British National Oil Corporation. The practical consequences of these savings will be less than appears since the electricity boards and the Post Office have been reducing their investment programmes in any case compared with the provision made in the last White Paper because the forecast of demand is now lower.

Mr. Michael Heseltine: The right hon. Gentleman has said that he will be giving an indication of the extent to which further resources will be diverted to industry. As it is a very important part of his strategy, and as the Secretary of State for Industry could not help us at Question Time, will the right hon. Gentleman indicate the scale of money to be diverted in this way?

Mr. Healey: I am not sure what the hon. Gentleman is talking about. cannot give an indication now. It will certainly be under £500 million and it will be over £50 million. Perhaps that will help the hon. Gentleman, otherwise he will have to wait for the detailed results for the White Paper in the autumn.

Mr. Heseltine: The White Paper forward figures for the National Enterprise Board show a budget of £250

million a year. Can the right hon. Gentleman indicate the percentage charge which might be implied in that?

Mr. Healey: No, I cannot. [HON. Members: "Why not?"] Because I am not in a position to do so. The hon. Member for Henley (Mr. Heseltine) will have to contain himself. He should count himself lucky that he has information on the broad magnitudes of departmental expenditure next year in the middle of the summer rather than at the end of the year, as is normally the case.
As I was saying, the electricity boards and the Post Office have been reducing their investment programmes in any case, and their main plans and objectives should therefore not be disrupted by the reductions. The British Steel Corporation will still be increasing its total investment both by comparison with the current year and with its original forecast for next year.
I must tell the House that the traditional treatment of the nationalised industries in the public expenditure figures is most misleading. The bare capital expenditure figures, making no distinction between investment financed from the internally generated resources of the industries themselves and that financed by borrowing from the Government and from other sources, give an unbalanced picture of the capital demands made by these industries, and one unrelated to their contribution to the economy. Therefore, as I told the House in my statement, this is a matter which we now have under review with the object of bringing our practice more closely into line with that of other countries, but but we shall, of course, consult the Expenditure Committee before making any general change in presentation.
The financial situation of the-nationalised industries is, of course, very different today from the situation which I inherited when massive Government subsidies were required to finance their operations because the previous Administration refused to allow them to charge a fair price for their products. The House should know that gas, electricity and the Post Office, the three biggest nationalised industries, are reporting profits totalling nearly £200 million this year compared with losses of over £600 million last year. Moreover, the British Steel Corporation—although, like steel


companies in many parts of the world, it is likely to show a substantial loss in the last financial year—is now heading towards the break-even point.
This year will show continued strengthening of the financial position of most of the major public enterprises. And many of these have agreed to operate a standstill on their prices until next April.
I have been asked for some examples of our achievements. This is one which the Opposition should welcome more than most, because it was their misdeeds in the last Administration which were responsible for the tangled mess I inherited just over two years ago.
Some commentators have criticised the measures because they do not affect the current expenditure of local authorities. But the standstill in local authority current spending embodied in the last White Paper already imposes a painful adjustment on them. It would not have been right to add to this. In 1973–74 the rate of increase in local authority current spending jumped to between 8 and 9 per cent., involving an excess over the limits laid down by central Government in those years of 3 to 4 per cent. in real terms.
I am not surprised that the right hon. Member for Leeds, North-East (Sir K. Joseph) has chosen this moment to leave. He might have chosen a more suitable time. Ah, here he is. I was referring to the excessive expenditure by local authorities in 1973, the increase in expenditure of between 8 and 9 per cent., and an excess over the central Government limits in those years of 3 to 4 per cent. in real terms. I cannot help recalling the words of the noble Lord, Lord Barber, the other day, that, in the days when the right hon. Member for Leeds, North-East was in a position to do something about his views, he was one of the most extravagant of all the spending Ministers and one of those who fought the cuts most vigorously.

Sir G. Howe: I should like the right hon. Gentleman to answer a question about what took place when he was in a position to do something. Does he recall that the reductions in public expenditure made by Lord Barber in May 1973 and in December 1973, which were opposed by the then Opposition in which he was

the spokesman on economic matters, had the intention of reducing the growth in local government spending in 1974–75 to an increase of 2½ per cent. in real terms but that once he arrived at the Treasury and abandoned control there was an increase in 1974–75 of 10 per cent. in real terms?

Mr. Healey: If the right hon. Gentleman wants me to agree that the Government in which he served was a Government of good intentions but appalling performance, I share his views.
There was a similar increase in local authority expenditure in 1974, for which I shared responsibility. I will not deny, as I told the Association of County Councils last week, that some of this growth was the fault of central Government under both parties. Too often, we passed legislation which compelled them to spend money which otherwise they might not have chosen to spend. We are determined to see that this will not happen again, but to adjust rapidly from rates of increase on the scale of recent years to a standstill is difficult and painful. The Government have made clear that for 1977–78, the year with which my measures are concerned, the rate support grant settlement will be made on the basis of expenditure figures in the last White Paper. We shall assume that excess resources received in 1976–77 above those necessary to finance the levels in the last White Paper will be put to balances and be available for rolling forward to finance expenditure in 1977–78. This means that the percentage figure for RSG in 1977–78 must come down. The House will know that despite the difficulties involved, representatives of 100 Labour-controlled councils in England and Wales have, since I announced my measures, accepted the need to halt the growth in council expenditure, and have congratulated the Government on not imposing further cuts in their current expenditure.

Mr. Stan Crowther: Does my right hon. Friend agree that much of the increased local government expenditure since April 1974 has been due to the incredibly wasteful system imposed on local authorities by the last Conservative Government?

Mr. Healey: I have often referred to that fact in the House. Apart from his


general profligacy, the right hon. Member for Leeds, North-East was responsible for the reorganisation of the National Health Service, just as his right hon. Friend the Member for Worcester (Mr. Walker) was responsible for the excesses in local government generally.
I now turn to the tax component of my measures—the addition of two percentage points to the employers' national insurance contribution which has been so fiercely criticised by the right hon. and learned Gentleman, though I should point out to him that it was Mr. Selwyn Lloyd, rather than Lord Kaldor, who, by his action in 1961, suggested that I should adopt this measure. I do not believe that it would have been possible to bridge the remaining gap of about £700 million in the reduction of next year's public sector borrowing requirement by further reductions in public expenditure without putting at risk some of the Government's most important objectives. But as I have made clear on many occasions, to have sought to bridge it by increases in direct or indirect taxation of the conventional type would have undermined the counter-inflation policy on which the success of the Government's economic strategy depends. It would have meant a big reduction in real take-home pay at a time when working people are already pledged to limit pay increases to a level below that expected in any of the countries which compete with us.
No increase in taxation or reduction in expenditure can be painless, but the 2 per cent. addition to the employers' national insurance contribution will be widely spread over the economy and will have a relatively delayed effect on demand for real resources. It will do less damage than other forms of tax increase—not only to living standards and the Government's counter-inflation policy, but to the interests of business itself. Business of course has a very strong interest in the continued success of the counter-inflation policy, and in the reduction of the PSBR if it wishes to prevent interest rates from rising.
I suppose it is natural enough that the CBI should have complained about the 2 per cent. addition, but the CBI has insisted on the need to reduce the public sector deficit next year and to go a great deal further than the stabilisation of

public expenditure programmes embodied in the last White Paper. It has asked for further public expenditure cuts. What perhaps the CBI has not fully appreciated is that any further action, whether by tax increases or by other cuts in public expenditure, would necessarily have depressed demand and reduced both the activity and the profitability of industry.
In fact, the 2 per cent. addition to the employers' contribution which I have chosen will have little, if any, more effect on industry's prospects than any other tax option that I might have chosen. The addition to total labour costs will be no more than about 1½ per cent. and the initial effects on industrial costs as a whole will be smaller still. Of the total full year revenue of £1,030 million, about £900 million will be payable by employers in the private sector. Of this, only about £400 million will be payable by manufacturing industry, and this is likely to be less than 1 per cent. of manufacturers' costs. It will, of course, temporarily affect liquidity and profits. But it will take effect at a time when company profits are improving and the domestic economy is more buoyant. Moreover, the financing prospects for manufacturing industry have been vastly improved by the lower taxation resulting from stock relief and the relaxations already announced in the Price Code.
Now that we have increased investment relief to 50 per cent., as against 20 per cent. at present and the 35 per cent. that we proposed in the consultative document last month, and have introduced a depreciation adjustment factor of 1·4, compared with 1·3 in the consultative document, there should be no net effect on industry's ability and willingness to invest. Indeed the changes in the new price code by themselves will more than offset the effect on manufacturing industry's profits of the addition to national insurance contributions. All firms will have had the opportunity to take full advantage of the new code for over eight months before the national insurance contribution increase comes into force.
If a firm's prices are constrained by the Price Code, then it can immediately pass the increased charge through to higher prices. But the effect on prices will build up only gradually—adding about 1 per cent. to the RPI by early


1978—far less than the effect of an increase in VAT with a similar effect on the PSBR in 1977–78.
In fact, I find it most unlikely that industry would have preferred a 4 per cent. increase in the standard rate of VAT, which would have been required to achieve the same effect on the PSBR. Moreover, we could not have announced an increase in VAT now to take effect in April 1977 without disrupting production schedules and encouraging forestalling.
The plain fact is that if the same amount were raised by VAT or income tax, demand for the products of industry would be cut at least to the same extent. To have achieved the same result by further expenditure cuts along the lines of the billion pounds already announced would have had much the same effect on company liquidity and profits in the next financial year as the addition to the national insurance contribution, and possibly a larger effect thereafter.

Mr. Richard Wainwright: The right hon. Gentleman has several times given figures of the estimated yield of increases in national insurance contributions. Are these net of the reduction of corporation tax revenue which will result as they will be regarded as expenses?

Mr. Healey: They are net, but the corporation tax effect comes in only a year later.

Mr. Nigel Lawson: Is the right hon. Gentleman trying to tell us that industry is better off with an increase in the payroll tax than with further cuts in public expenditure? If so, why did he not carry out the entire exercise on the payroll tax and not cut public expenditure at all?

Mr. Healey: I am not saying that industry is better off. I said that it is little or no worse off than by further public expenditure cuts along the lines which I announced on 22nd July.

Mr. Brian Sedgemore: I do not dissent from the suggestion that if one is to do this at all, this is as good a form of tax as any by which to do it, but in view of the difficulties to which my right hon. Friend has just referred, will he comment on what has happened

to the patriotism of the CBI and the investment strikers?

Mr. Healey: I must be cautious in my response to my hon. Friend's invitation. I shall be moving to that point in a moment.
Before I do so, however, I must say how surprised I was to see a report carried on the front page of The Times that the Retail Consortium, in making a forecast of increases in food prices by the end of this year, says that the Government's decision to put up employers' national insurance contributions is "a contributing factor". That really is screaming before you are hit, because the increase does not take effect until next April. I understand that the Retail Consortium has got the food price forecast wrong, too. Some mothers do have them!
I believe that once industrialists have a chance to reflect on the points I am making they will realise that it would have been impossible to reduce the public sector deficit by the amount they themselves have called for by means which would have had significantly less effect on company profits. Even if they find it impossible to accept this conclusion I hope, at least, that they will show the same common sense and patriotism as the trade unions. The leaders of the TUC have found the public expenditure cuts quite as unwelcome as the employers find the addition to the national insurance contribution. But they are not allowing their feelings on this issue to affect their support for the counter-inflation policy, or their support for the improvement in industrial relations, which means that we have had fewer strikes in the last year than in any year since 1953. I hope that those on the other side of industry will show similar powers of leadership and similar patriotism. I suspect that they will, and that, despite some of the words spoken recently in haste, we shall find investment rising at an unprecedented rate in the coming year.

Mr. Ron Thomas: Would my right hon. Friend be good enough to explain what he feels the impact of the increased national insurance contributions will be on employment in the public sector?

Mr. Healey: The effect on employment in the public sector will be very small indeed. It does not affect the non-trading


public sector and, as I explained a moment ago, £900 million of the £1 billion total of the NIC contribution will be paid by the private sector.
Now let me say a word on the effect of the measures on unemployment, which I know is the main concern both of the TUC and of my hon. Friends. As I said in my statement the week before last, I expect that, as a result of the measures I then announced, the fall in unemployment at the beginning of 1978 might be about 60,000 less than it would otherwise have been, in theory. Very roughly, 50,000 of this 60,000 would be due to the public expenditure measures, and 10,000 to the addition to employers' National Insurance contributions.
I said that in theory unemployment might have been 60,000 lower at the beginning of 1978 without these measures. But in practice, if these measures had not been adopted, then over-heating of the economy, or a balance of payments deficit which we were unable to finance, or the pre-emption by the Government of money industry needs to finance its activities, or all three of these consequences would have brought our growth to a halt as they did in 1973 and caused a far greater increase in unemployment than is likely to follow from these measures.
There have been suggestions that the figure of 60,000 grossly underestimates the effect on unemployment. I do not believe this is the case.
First of all, the increase in national insurance contributions will affect unemployment with a considerable delay. I have therefore agreed that by, say, early 1979—that is nearly three years from now —the effect could be bigger. But by that time I would expect the period of high unemployment to be behind us anyway. That is certainly the objective of our policies.
Secondly, the unemployment effects are estimated on the assumption that the reduction in demand from the public sector and consumers is reflected in lower output. However, to the extent that investment and exports increase in response to the fall in public sector and consumer demand—after all, this is the whole purpose of the exercise—the effect on unemployment will be less than I stated on 22nd July.
Thirdly, I do not deny—this point was raised by one of my hon. Friends—that employment in the construction industry will be hit. But the measures as a whole create the best opportunity of replacing construction work in the public sector with construction work on the new factories which will be built as industrial investment gets under way, and that is worth more to the economy as a whole.

Mr. John Mendelson: My right hon. Friend knows that for a good many of his own supporters this is the crux of the whole problem. As he has indicated, he hopes that some of the fears felt by many hon. Members will be outweighed by a general recovery before the three years are up. However, if his optimism is misplaced and the more pessimistic predictions, for instance, on the OECD level prove to be true, will he revise his policies so that a higher level of unemployment in the construction and other industries will not take place?

Mr. Healey: In answer to that pertinent question, of course if the rate of growth proves to be much lower than I am aiming at, I shall have to revise my policies. But I do not want anybody to be under the illusion that it will make it possible for us to have a higher level of public expenditure. Indeed, the reverse might be the case. I think the problem is that to achieve a level of full employment at which we are aiming for 1979 means an exceptionally high rate of growth in GDP in the next three years, particularly in manufacturing output. If we fall short of that, we shall face a whole range of very worrying problems in many fields. I do not deny that that is the case. But I cannot say that the answer to the problem which we would then face would be increases in public sector employment which were not financed by increases in taxation. The fact is that we would all face a very substantial lowering in our living standards is an inevitable consequence.

Mr. Ridley: rose—

Mr. Healey: With respect, I have already given way a good deal. The hon. Member has not been here throughout the whole of my speech. He has only just returned to the Chamber.

Mrs. Castle: rose—

Mr. Healey: I must get on. I have already given way to my right hon. Friend, and other hon. Members have intervened.

Mrs. Castle: rose—

Mr. Deputy Speaker: Order. If the Chancellor does not give way, he must obviously be allowed to continue speaking.

Mr. Healey: The fact is that without these measures the chances of a steady return to full employment would have been far smaller. With them we have the best chance since the war of basing full employment on sustained growth led by exports and investment.
Of course, the recent measures are unwelcome to all whom they directly affect. They are unwelcome to the Government themselves. But they are a necessity, however painful, if we want to permit a steady return to high employment without inflation and without unacceptable damage to our balance of payments. The measures in themselves—I return to the point raised by my hon. Friend the Member for Penistone (Mr. Mendelson) can only make it possible for Britain to reverse her post-war economic decline. They do not make it inevitable that she will do so. That depends, above all, on achieving the improvement in the performance of our manufacturing industry which it is the purpose of the industrial policy to carry out an industrial policy to which employers and unions alike have pledged themselves. I was glad to see that Lord Watkinson made this point the other day. The Government have expressed their commitment to a vigorous and profitable private sector and have pledged themselves, with the TUC and the CBI, to work towards the objective we all want—a high wage, high profit economy based on high output, and full employment. We shall be addressing ourselves collectively to the next stage of our strategy for achieving this when we meet the NEDC on Wednesday.
The response to our measures from our friends abroad has already been encouraging. I have quoted the views of OECD economists. The House will have seen that a leading official of the American Government has described our strategy as one with which we can win. I think that the average man and woman

in Britain recognises the measures to be necessary and will agree with the views expressed in the Daily Mail—namely, that the Government deserve on this issue, which is central to Britain's economic revival, the uncarping support of the Tory Opposition in Parliament. If so, I fear that they have been disappointed.
I have said before in the House that the Opposition have lost their power to surprise. However, I expect that some of their supporters must have felt a little disappointed when they read the terms of the motion tabled by the Opposition for this debate. It is a final demonstration of their political bankruptcy. They have been afraid to commit themselves to any policy or to say what they would do in my position. Instead, they have taken refuge in a motion to cut my salary, although they are asking for me to resign. At least that is a little better than last week's attempt to prove their virility by refusing pairs to men who were seriously ill, thereby forcing them to risk their lives to do their duty to Parliament.
I am not in the least surprised that the Opposition Front Bench declines to say what it thinks we should do. We have had the usual crocodile tears about unemployment from the right hon. and learned Member for Surrey, East, and the Centre for Policy Studies of the right hon. Member for Leeds, North-East has just published its latest fantasy claiming that unemployment is really only 816,000, or 3.1 per cent. of the working population. I wonder whether he has reconciled his figures with those of his right hon. and learned Friend. Perhaps they can have a word about it behind the Chair. The right hon. Gentleman can tell us what conclusions they reach when he replies. The fact is that all the policies that the Opposition have been urging on us are calculated deliberately to increase unemployment on a far larger scale than anything that the Government are doing.

Sir Keith Joseph: The Chancellor of the Exchequer has today spelled out to the House precisely the argument about which we have been warning him, his colleagues and the country for two years—namely, that rising public spending strangles the private sector and does not reduce but increases unemployment. Public spending under this Chancellor has nearly


doubled, and so has unemployment. It is the private sector to which the Chancellor is now beginning, falteringly, to give some scope for expansion. That alone provides hope for this country and for full employment.

Mr. Healey: The right hon. Gentleman—

Several Hon. Members: rose—

Mr. Deputy Speaker: Order. Opposition Members complained about some interruptions from the Government Benches during the speech of the right hon. and learned Member for Surrey, East (Sir G. Howe). I hope that Opposition Members will not interrupt the Chancellor. Mr. Healey.

Mr. Healey: I was going to say that the right hon. Gentleman makes a far better fist of representing the real views of the Opposition than does his right hon. and learned Friend. I think that we are all perplexed that the Leader of the Opposition keeps the right hon. Gentleman immured in a think tank, the Centre for Policy Studies, instead of allowing him to preach the pure gospel in which he truly believes. I am sure that if we had the right hon. Gentleman representing the Opposition in these debates he would not hesitate to say that he wants to cut public expenditure by £3 billion. He would tell us, but at the moment we are not allowed to know the Opposition's real views.
I read in The Times recently that the Conservative Shadow Ministers were meeting for detailed discussions on the midterm policy programme. Documents had been prepared, which it is understood put forward proposals for public expenditure cuts of £2,000 million and £3,000 million. But we understand that no precise figure is likely to appear in the document to be presented before conference this autumn. I wonder why.
I noticed that when the right hon. Member for Leeds, North-East, the pale shadow of the read Shadow Chancellor of the Exchequer, was interviewed by—[HON. MEMBERS: "Trivia."] I agree that the antics of the Opposition Front Bench can rightly be regarded as trivia, but so long as they persist in asking the country to treat them as a potential Government, we have the right to have some precision from them as to the nature of their poli-

cies. We do not know by how much they want to cut public spending. All they say is that what we have proposed is inadequate. We do not know where they would make cuts. Certainly they would not cut defence spending. The Leader of the Opposition, for the second time, has declared war unilaterally on the Soviet Union.
When the right hon. and learned Member for Surrey, East was asked by Mr. Robin Day whether he would cut mainstream social benefits—he was asked these questions on television on the night of the cuts—he said "No". Then he said "Or at least not significantly." He was then asked question after question. For instance, he was asked whether he would cut overseas aid and he said that he would look at it. He was asked whether he would cut nationalised industries. He replied that he would look at it. He was asked whether he would cut the housing budget. He said that that was another area that they would look at. He was asked whether he would cut the housing grammes and he said "Well, we shall have to look at all the programmes." The right hon. and learned Gentleman is a political voyeur. He just looks at it and never does anything.
The right hon. and learned Gentleman has elevated impotency into something more than an economic or political principle. It has become a way of life for him. On those grounds we should reject the Opposition's trivial and irresponsible motion with the contempt that the right hon. and learned Gentleman and it deserve.

5.28 p.m.

Mr. Edward du Cann: I shall not follow the Chancellor in the knockabout farce that he has introduced us to. Surely the House of Commons is dealing with the most important subject that it can possibly discuss at this time. The subject is to be treated vastly more seriously than it is treated by the right hon. Gentleman.
There is much in the package of measures announced 10 days ago to criticise and to question, as did my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) with commendable effect. However, Mr. Speaker has asked that we should all be brief. I am only sorry that the Chancellor did not see fit to follow that advice.
One particular question arises from his speech on which I hope the Chief Secretary will be good enough to comment when he replies. When my hon. Friend the Member for Henley (Mr. Heseltine) interrupted the Chancellor with a question about the expenditure or, as some might say, the extravagance of the National Enterprise Board, the Chancellor seemed very uncertain. But leaving that for the moment, perhaps the Chief Secretary will be good enough clearly to describe to the House what he sees as being the arrangements for proper parliamentary scrutiny of the work of the NEB in future. That is a matter that concerns us all greatly, and one about which I believe the House should be more concerned as time goes on.
I come to the single point that I shall make in this debate, and I shall put it in this way: when I was first elected to the House of Commons in February 1956, to within one minute of my taking the Oath and shaking hands with Mr. Speaker I took my place in the Chamber to listen to the Chancellor of the Exchequer of the day announcing a programme of cuts in public expenditure. Over the years, it has become a tediously repetitious process. Perhaps a dozen times—I have not counted: it may be 20 or more—in 20 years, one has had to listen to such a list.
All these lists have been irrational. All, like the list that we are debating today, have consisted largely of trivia. As my right hon. and learned Friend said, they are matters which have been hastily cobbled together. Each list has been more unconvincing than the last, and this list is the most unconvincing of all.
Each in its way has been a token of failure—failure of the Chancellor of the day to control Government and local authority expenditure and, in consequence, our national economic failure.
How over these years public expenditure has grown! Early in this century, combined central and local government expenditure was the equivalent of between 10 and 15 per cent. of the gross national product at factor cost. By 1964, it was 41 per cent. Now, as right hon. and hon. Members opposite are only too painfully aware, it is over 60 per cent. And it has all, let us note, been unplanned.
The economy now contains a built-in bias in favour of the public sector. Increasingly, as my right hon. and learned Friend so rightly said, it becomes urgent if the economy is to re-establish its dynamic potential that Parliament should seek once and for all to decide what should be the proper relationship between the supply of privately-produced goods and services and those of the State. If confidence is to be restored at home and abroad, that must be attempted or done. We cannot shirk answering that question much longer. I thought that the right hon. Member for Huyton (Sir H. Wilson) was entirely right to say at Chequers a year ago:
Confidence demands that a clear frontier be defined between what is public and what is private?
As I go about the country, it seems to me that the disunity of the main political parties in this House at what we all know so well is a critical time in our nation's economic fortunes is a source of growing cynicism among the electorate. They say—I agree with them—that instead of divisive arguments over whether there should be cuts in expenditure, this House would be a more admired place if Members of it united to enforce an effective control. That is precisely what we do not have at this time.
The first argument should be about how to control expenditure, which methods would be the most effective and the like. Arguments about priorities in expenditure, of which this House is so fond—the Labour Party in particular—can and should very much come second.
Listening to the arguments across the Dispatch Boxes today, I am less concerned with arguing which is blacker, the Conservative pot or the Labour kettle, than with pointing out that it is high time for a general spring clean. The Chancellor would be much more effective if, instead of pouring continual scorn on private enterprise, he did something to understand the point of view of those who have the responsibility of management in industry and whose job he seems almost deliberately to make more difficult.
What should be the criteria for judging the acceptable size of the public sector? Certainly any judgment must be arbitrary, and, I acknowledge, politically controversial. But if a control system is to be


established, Parliament in the end will need to prescribe the parameters. We must debate and decide what level of borrowing requirement is acceptable in any year—at the moment, we are obliged to accept what the Chancellor ordains—and Parliament must estimate the likely growth in total resources and the proportion to be allocated to the public sector. That, surely, is a more logical method of proceeding than allowing the public sector first call on resources, quite irrespective of their size.
It is to these practical questions that we should address ourselves instead of the sterile political feuding in which we mostly engage and of which the Chancellor is such a miserably undignified proponent. I make the point again—as Plowden once suggested, public expenditure should be surveyed in the light of available resources. That recommendation, alas, has been quite forgotten. My reason for wishing to restate and re-emphasise it is simply that too large a public sector will in the end destroy the economy which is supposed to support it.
I am therefore impatient of these cuts. Indeed, more: I am contemptuous of them. All the same, I argue' that public expenditure should take a smaller proportion of GNP. It is now the greatest inflationary force in our economy. Additionally, it is a huge discouragement to personal and corporate endeavour. It is out of hand and has been out of hand for a long time.
The way to reduce the figure is not by hastily-arranged cuts such as these but, first, by definitions of the sort that I have described, supported by the establishment of a proper machinery of control by this House—or, if Ministers will argue that it already exists, then by enhancing it. Perhaps I can make some suggestions.
First, let us agree that the annual forecasts of expenditure henceforward be sacrosanct. Let us agree that the PESC commitment be specific, not a mere academic discussion of what has taken place or what might.
Second, let us lay down that spending Departments may no longer adjust their budgets for price increases. I regard the proposals for cash limits as being a most exciting experiment. The House

will do well to insist upon their maintenance and few exceptions to them. In particular, they should apply to local authorities also.
Third, let us instruct Ministers that no new policy commitments involving expenditure may be undertaken by them without prior authorisation by Parliament or compensatory savings elsewhere.
Fourth, let us ensure that henceforward all open-ended commitments must fit the forecasts on which they are based.
Fifth, let us recast the British budgetary system to provide that decisions affecting taxation and expenditure are considered together. Costs and benefits surely are or should be indivisible and if Parliament has a duty it is to emphasise to the electorate their interdependence. We fail people rather than serve them if we pretend that there is a bottomless pit from which all welfare can automatically be paid.
We all know that we cannot go on any longer as we are. In my time in this House, I have watched the standard of living of the British people continuously decline in relative terms. There is not one of us who does not know examples in his constituency of people at the bottom end of the scale who are not receiving welfare fully adequate to their needs. I dare say that each of us has, in his constituency a long waiting list for non-emergency operations in inadequate hospitals. These failings—one could lengthen the catalogue, but every hon. Member knows them—are the measure of continuous failure by Governments. We need a new emphasis on value for money.
People outside the House laugh openly at the list of cuts that the Chancellor introduced 10 days ago. There is not a citizen who cannot provide, for the interest and information of us all, his own examples of profligacy in public expenditure—and if he cannot, the Public Accounts Committee and the Expenditure Committee can. Since the Chancellor mentioned the Daily Mail I shall also. Andrew Alexander was at his best in that newspaper this morning in putting forward examples of his own.
The individual Member of Parliament is no longer an effective guardian of the public purse. He is no longer the effective guardian that the public trusts him to be. As a House of Commons we are no


longer playing effectively our traditional democratic rôle as controller of the Executive through control of the public purse.
By what machinery should that be done? Views might vary and hon. Members may have their own solutions. I put forward my own, for example, in an article in The Parliamentarian and I shall put them further to the new Select Committee on Procedure.
Machinery is one thing. There is a second condition and that is simply stated. It is just the question—so easy to put. and not so easy to answer—whether Parliament has the will to do what in its heart of hearts it knows has to be done in the interests of all. For, make no mistake, the restoration of full parliamentary control—that is to say the control of Back Benchers, the peoples representatives, over Ministers—in these days of strong party disciplines, will not be a universally popular proposal. It is unlikely to recommend itself to Ministers or to their party apparatchiks either—for is it likely that they will approve in any way a situation where the (-Ole of the individual hon. Member is enhanced? That seems to me the best of all possible reasons why it should be done, or at least attempted.

5.42 p.m.

Mr. Douglas Jay: The right hon. Member for Taunton (Mr. du Cann) attempted to make a serious speech about public expenditure. But I found the speech by the right hon. and learned Member for Surrey, East (Sir G. Howe) singularly mischievous and irresponsible. It was calculated to do harm to sterling and to the national economy generally. I also found unconvincing the sweeping demands for economies in public expenditure and for better parliamentary control, because we know that the Conservatives want to spend more on defence and every week at Question Time they demand further increases in expenditure. Some of us also remember that it was the previous Conservative Government who decided to spend £800 million on Maplin, £800 million on the Channel Tunnel and between £1,000 million and £2.000 million on inner London motorways. All those wildly extravagant projects would be swallowing up money and resources now if the Conservatives had remained in power. They were all

cancelled by the present Government, and I support those cancellations.
I also support the present Chancellor's decision to reduce public sector borrowing from £10½ billion to £9 billion—not a very dramatic change in the present situation. I have two reasons for supporting my right hon. Friend the Chancellor. First, I do not believe that it can be right to go on borrowing £10 billion a year at 13 per cent. or 14 per cent. interest year after year and mortgaging both our future Budget and balance of payments thereby limiting our opportunity to spend on other objectives.
Secondly, many people seem to forget that the more the Government borrow, the higher interest rates will be; and that the higher interest rates are, the less industrial investment and the less employment there will be. We cannot expect private firms to borrow at a rate of 14 per cent. or 15 per cent. to invest when they get a return of only 5 per cent. or 6 per cent. That clearly will not happen. Therefore, there is a gain in employment here from less borrowing to set against any loss of employment from less spending.
I also support the decision not to make a sweeping percentage cut across all programmes which I have always thought to be a most irrational method. But I cannot altogether agree with the Chancellor's individual priorities.
He should, I believe, have made a major cut in the excessive tax relief on mortgage interest payments and thereby could have halved the increase in employer's insurance contributions. Mortgage relief is now running at £1,020 million a year and it goes mainly to people who are moderately well off. That relief is also one main cause of the decline in the number of privately rented houses and is therefore bad housing policy. The Chancellor could have found £450 million from this and the other £450 million, no doubt, from insurance contributions, which industry could more easily bear.
Next, I would have left new house-building alone and made a larger economy in new road building. Does the House realise that we are now spending £1,200 million a year on roads and that £725 million of that is spent on new road construction over and above maintenance? Much of the road building, although no doubt desirable, has a low


priority, and in some cases it is strongly opposed by considerable sections of public opinion. The Chancellor could have saved £350 million by economy there. Has he incidentally noticed that the Department of Environment has largely destroyed the case for motorway building based on industrial and export grounds with one candid and truthful sentence in its own transport policy document? That reads:
Lorries are and will remain a relatively small percentage of the total traffic, and their contribution to the case for justifying new roads is correspondingly modest.
That is a most remarkable admission from the Department.
At the same time, those who claim that there is some painless alternative way out of our present difficulties fail in my view to understand how we got into them. There are two basic reasons for our present balance of payments and Budget difficulties. The first and most fundamental is that if pay rates right up the scale rise much faster than output—as they did here and in most industrial countries in 1974 and 1975—prices must rise; and if the Government then expand demand to employ everyone at the higher rates, the economy will lurch towards faster and faster inflation.
If the Government do not do that, if they refrain from increasing demand and the money supply, we are then bound to bear some temporary unemployment until productivity and the upswing of the trade cycle in the outside world have caught up with the excessive pay rates prevailing. That is to put it rather summarily, but I believe that it is the root of the matter. Just because this process of getting back into balance is so painful, the real moral of the story is—do not let it happen again.
Unless one is brave enough—and I do not think that many people here are—to advocate risking South American inflation, one must be honest enough to admit that the real cause of present unemployment was the unprecedented pay increases in 1974 and 1975. I believe that to be the basic truth. [Hon. Members: "Hear, hear".]
But there is a second cause of our present economic difficulties which Conservative Members may not be quite so glad to admit. This is more gratuitous

and more peculiar to Britain—the huge burden on our balance of payments already inflicted on us by our membership of the EEC. It is remarkable that those who urged us to join the EEC on economic grounds now never mention the EEC in an economic debate. We do not now hear much in Tory speeches about the great home market which would save us.
Therefore, let us look briefly at some of the hard figures, first for food and secondly for non-food trades. The prices of virtually all the main foodstuffs imported by this country are now higher in the EEC than in world markets. Figures were given by the EEC Commission in its agricultural report for 1975 showing that on average grains were 10 per cent. dearer in the EEC, meat products 60 per cent. or 100 per cent. dearer, and dairy products about 200 per cent. dearer.
It is a simple calculation to show, from the actual volume of United Kingdom food imports in 1975, and the Commission's own price statistics, that it would have cost the United Kingdom in that year about £800 million extra on the balence of payments to import food at EEC rather than world prices. We are not yet bearing that full burden, because of temporary devices such as the green pound and the transitional period. But we shall soon have to do so, and the figures suggest that the burden on the balance of payments on account of food alone must have been about £500 million in 1975.
On non-food trade, the figures are even more remarkable. When one points out our enormous visible trade deficit with the old EEC Six countries, which is so contrary to what was predicted, one is told by the propagandists that we have also got into deficit with the rest of the world, and that it is nothing to do with the EEC. The truth is very different. Let us omit food, the figures for which I have already given, and oil, which would distort the picture. Let us then see how our trade balance in other goods, mainly manufactures, has moved since we joined the EEC. [Interruption.] I am sure hon. Members can see that if we include food the picture is unfair to the EEC, and if we include oil it is unfair to our trade with the rest of the world, because of the exceptional price increase.
With the non-EEC world, the United Kingdom had a visible trade surplus in


1970 of £1,186 million and in 1975 of £3,220 million, an improvement of about £2,000 million. But with the old EEC Six we had a small surplus of £195 million in 1970 and a deficit of £990 million in 1975, a deterioration of nearly £1,200 million over the same period. Those figures show that, apart from oil, the worsening of our visible trade is almost entirely with the old EEC Six, the great home market which we were all told would save us.
Therefore, if we take into account both food and non-food trade, there is no doubt from the figures that EEC membership is already costing us between £1,000 million and £2,000 million a year on our balance of payments. To ignore this or to conceal it is to deceive the public about what is happening and about the causes of our economic difficulties.
My practical conclusion is as follows: I agree with my right hon. Friend the Chancellor of the Exchequer that export-led recovery is within our grasp. But to realise its full possibilities we must still do two things. First, we must maintain next year and thereafter a clear and agreed but more flexible long-term restraint on money incomes. Secondly, we must extricate ourselves from the monstrous follies of what my right hon. Friend the Prime Minister himself rightly called last week the "just plain daft" working of the common agricultural policy of the EEC.

5.57 p.m.

Mr. Peter Emery: I have seldom heard from a Chancellor of the Exchequer a speech with so much spleen and spite as that of the Chancellor today. At the slightest sign of criticism he showed a refusal to believe that any point could be made by the critic, to the extent that he even refused to give way to his right hon. Friend the Member for Blackburn (Mrs. Castle), when he had palpably refused to answer her question and had postponed dealing with it until later in his speech. That was an illustration of how the right hon. Gentleman believes that no criticism is to be made of him.
Of the Chancellor's measures to improve the economy, I would say only that it is better that they have been done than that they should not have been done. When one has said that, one has

said everything favourable that can be said about the cuts. The right hon. Member for Battersea, North (Mr. Jay) said with great courage that the basic truth was that a major reason for unemployment was the size of pay awards in 1974 and 1975.
I should like to follow the example given by my right hon. Friend the Member for Taunton (Mr. du Cann) by trying to make concrete suggestions about ways in which we can benefit the nation as a whole, rather than take part in a party charade across the Floor of the House. Most economists, business men and even politicians have known for months—many have known for a year or so—that profligacy in public expenditure had to be brought under control. The tragedy of the Government's refusal to act, their postponement of a reduction in public expenditure, is that for each month that passed without action the greater became the need, and the bigger had to be the cuts that we are now suffering.
In an analysis three things clearly emerge. Were the cuts early enough? My answer is an emphatic "No". Are the cuts adequate? Again the answer is in the negative. Certainly some public expenditure should be pruned from the financial expenditure this year. International reaction to the Chancellor's statement is absolute and continued proof of that fact. The pressure on the pound continues, and it would not do so if the levels of cuts were sufficient. Thirdly, are the overall effects of the package pointed in the right direction? Again, I believe that the answer is in the negative.
What worries me is that in face of a golden opportunity to put the country economically in the right direction, the members of the Treasury Bench are so obviously turning their backs on the real problem. It is to that aspect of the matter that I wish to draw attention in my brief remarks.
Treasury officials have produced the right analysis of the problem. They believe that it is only by productive industry that we shall get our nation out of its downward inflationary spiral, and Ministers have accepted that. The Treasury believes that it is only by productive industry and the efficiency of the wealth-creating industries—nearly all of them within the private sector—that a


cure can be found to our problems. Therefore, when the Prime Minister and the Chancellor of the Exchequer appear to propound this policy themselves, why is the overall effect of this package another massive attack on the profitability of the private sector? That is the very area from which the Chancellor is begging for greater and greater investment.
I wish to discuss two aspects of the package—first, the madness of the Left wing—perhaps it is not madness but cunning—and, secondly, alternative steps that could be taken. The Tribune Group and the 70 hon. Members whose names appear on the Order Paper advocate no reduction in Government spending, unless by way of defence cuts. Some Labour Members have even gone into print advocating increases in public commitments. Their argument is that the level of unemployment is so high that nothing must be done to decrease public expenditure which, in true Keynesian fashion, creates jobs. Theoretically that is correct as far as it goes, but the greatest creater of unemployment is inflation itself. As money values fall so does the job level that public expenditure can maintain.
Let me cite as an example the subject of education. The average amount of money spent on education has increased by £84 million on 1970 survey prices, but this year the number of teachers who can be employed by education authorities for each 20 pupils is likely to fall by as much as 1 per cent.—not because the education authorities do not want to employ teachers, but because inflation has ensured that there will be fewer jobs in the vital task of education. Fewer jobs and a worsening of public services is the inevitable outcome of galloping inflation. Unless inflation is brought under control, the situation is bound to get worse. Unemployment figures will rise and industry will not be able to proceed fast enough, and we shall find our industrial markets at home being squeezed, inevitably leading to fewer jobs for Britain's workers.
Is that a situation that some hon. Members would like to see—namely, an ever weaker private sector, with industry having to call for more and more Government aid and support? Do they envisage larger sections of private industry falling into the net of public ownership?

That is the dream of the Marxist Socialist. He envisages more and more turning to the State economy rather than the mixed economy. The nation needs to wake up to the truth.
I wish to try to expose the facts which I believe have for too long been thrust aside or conveniently forgotten because they are thought by politicians to be unpopular, to lose votes and to run contrary to the way the electorate thinks.
However, at this time of financial crisis, I believe that ordinary people will not give a "Thank you" to any of us for being misled. What the average elector wants is the truth, with all its unpleasant realism—and he wants to be told with absolute clarity so that he can understand the real situation, even though it hurts. The more I move round the country the more I find that the average person does not understand what the Labour Government are doing.
The people are constantly told that we are living beyond our means. I believe that fact is understood by most workers wherever one may go in industry, and indeed that situation is understood by the people. Everybody says that we must do something about the situation, but it always appears that in most instances it is the other chap who is tightening his belt. Likewise, I believe that politicians, because it does not win popularity contests, do not like telling the nation what it does not want to hear.
It seems to me that the facts speak for themselves. Only through the efforts of private industry are we likely to reduce inflation to a realistic level. Only by the profits of private industry shall we achieve real investment to embrace the new growth that will lead to more jobs, which in turn will reduce the ghastly level of unemployment that is so wasteful and so soul destroying.

Mr. Martin Flannery: The hon. Gentleman is leaving one vital factor out of his remarks—namely, the lack of investment on the part of the supporters of many Conservaive Members who should be investing in industry to bring about the much-vaunted recovery about which the hon. Gentleman spoke. Will he tell the House how he believes the CBI should act to persuade industry to invest more? I am talking about the concept of patriotism at a time


when a policy involving lack of investment seems to be the aim of the Conservative Party.

Mr. Emery: I did not get on to the aspect of patriotism. My point is that industry will invest only if it can sell the goods it manufactures. If it cannot sell those goods, it is no use manufacturing them. Industry wants to make profits. It wants a business climate in which it can operate successfully, but that climate is being destroyed by the Labour Party.

Mr. David Price: Does my hon. Friend agree that if industry has a likely return on its investment of 12 per cent. and then has to borrow at 15 per cent., as the right hon. Member for Battersea, North (Mr. Jay) pointed out, there is no deal—and sweetly-worded letters from the CBI do not change the situation?

Mr. Emery: I agree entirely with my hon. Friend. Indeed, the next sentence in my speech is most relevant on that point. I was about to say that an economic package that looks like reducing industrial profits by over £1,170 million must be madness—and that will be the result of the Labour Government's policy. We must think that the Chancellor has lost his cool. How can he begin appealing to industry to invest and to carry forward with the job creation programme which Labour Members want while at the same time taking drastic swipes at the profitability of companies in the private sector?
What do I believe must be done? How would I structure the reduction in Government expenditure so that it helps industry, relieves unemployment and assists the stability of sterling which today is grossly undervalued because of the financial and fiscal policies of the Government? In terms of the dollar, sterling is worth much more than the international money markets seem to believe. How can we help? We can assist only by a drastic change of policy. We can change things only by realising that no nation can for ever finance a higher standard of living and a higher level of social security on borrowed money. We must restore Government expenditure in the areas of industry which will produce industrial expansion and assist in creating profits, thus ensuring that the wealth-

creating aspects of the nation are unhampered and encouraged. This is not Marxism, nor is it the policy of the Tribunites, the Manifesto Group or the Government. Nor, I am afraid to say, do we Conservatives spell out clearly enough how this can be achieved, even though we may strongly advocate the end result.
There must be a major change in policy, a change not advocated at the moment by either Front Bench. If we are not to cut Government expenditure which helps wealth creation—and in the nationalised industries this means that there must be no cuts in investment in steel, certain transport facilities, research, certain areas of education, all of which are investments for the future—we have to cut the non-productive elements of Government expenditure. This means a major re-think of expenditure on our social services. It means a cut in some areas, a reduction in capital expenditure in others, and a major cut in aid to overseas nations. If we do not make a positive step in these directions, events and inflation will do the same thing for us. They will cut the purchasing power of these facilities and we shall be worse off than if positive steps had been taken.
We can pay the levels of social benefits and pensions that we would like to pay, we can give the aid to all and sundry which we would like to give, only when the nation is not borrowing abroad to make such payments but is producing the wealth that can be taxed to make such payments possible.
What are the cuts that I would advocate? In social security, there should be a 5 per cent. cut across the board. Expenditure, calculated at 1975 survey prices, is £10 billion and my proposed figure would mean a reduction of £500 million. There should be a cut of 15 per cent. in unemployment benefit. All too frequently today many people are quite happy to stay on unemployment benefit rather than take up jobs which are open to them. I had an illustration of this. I had been attempting to have certain jobs done in London and had make approaches to the Employment Exchange, asking for people interested in building and decorating. I had suggested the rates which the building industry recommends and yet I could not get people to do the work.
I believe that there should be a 10 per cent. cut in overseas aid which would amount to £44 million. The school meals service should be financed entirely by the parents' contributions. That would produce a saving of £301 million. Office and Government services amount to £243 million at the moment. There should be a 10 per cent. cut giving a £24 million saving. According to the Government's Blue Paper the Civil Service is costing £182 million. A 10 per cent. cut would save £18 million. A 25 per cent. cut on housing subsidies, currently standing at £1,323 million would bring in a saving of £331 million. Environmental services should be cut from £2,062 million to about £65 million. This, with Supply expenditure, would produce about £1,297 million.
Turning to the capital side, in electricity I would order a cut in capital expenditure of 10 per cent.—greater than that which the Chancellor is advocating—which would produce a total saving of £88 million. In the health services, a cut of 10 per cent. would produce a saving of £38 million while in the road programme, currently running at £378 million, a 10 per cent. cut would produce about £38 million. In local and central Government expenditure on education, a 10 per cent. cut would bring in a saving of £95 million.
Lastly, while I do not think that the British National Oil Corporation can be abolished immediately, I would ensure that its capital structure spending of £250 million was reduced by 80 per cent. to £50 million. All of this would bring in a capital saving of £459 million, producing a total saving of £1,756 million—all of which would in no way limit the productivity or productive potential of the nation, whether in the public or private sector.
I am sorry if I have taken some time to set this out but someone has to get up and spell out clearly that social service expenditure is not a sacred cow which can- not be touched. It can be afforded by the nation only if we are creating the necessary wealth. My suggestions would produce a reduction in the public sector borrowing requirement of about £1,284 million.
I would wish to do two other things. There would have to be an increase in

certain social security benefits. If those were at the rate of 10 per cent. of the total of the cuts I am advocating of £1,146 million, we would have to make an increase of £115 million. To show industry that we wished to encourage investment I would want to see a cut in corporation tax from 52 per cent. to 47 per cent., which would mean a total extra expenditure of £357 million a full year.
What I am seeking to bring about, therefore, is a cut in public sector borrowing of 78 per cent. in addition to that which the Chancellor of the Exchequer is himself advocating. I know that what I say is controversial and that probably it will be scorned by many Government supporters. However, someone in this country has to tell the people the truth.

Several Hon. Members: rose—

Mr. Deputy Speaker: There are 36 hon. Members who still wish to take part in this debate. Unless we have a drastic cut in the length of speeches, the result will be a drastic cut in the number of hon. Members able to participate.

6.20 p.m.

Mr. Arthur Latham: I accept what you have just said, Mr. Deputy Speaker, although I am sure that many hon. Members on both sides of the House will feel that it would have been a pity if the latter remarks of the hon. Member for Honiton (Mr. Emery) had not been addressed to the House. It is something of a nightmare to hear his prescription for the future. At the same time, however, we should be worrying that he might be speaking not only for himself, and that perhaps there are many right hon. and hon. Gentlemen on the Opposition Benches who think in similar terms.
One extraordinary feature about the sums put forward by the hon. Member for Honiton which struck me was that, apart from taking £1,756 million out of community services and giving back £357 million in corporation tax, he forgot to add on the £1,000 million which he and his right hon. and hon. Friends want to spend on defence. Taking account of that, the hon. Gentleman's proposals represent merely a transfer from community resources to defence expenditure and, presumably, to profits.

Mr. Norman Atkinson: It might become known as an Emery paper.

Mr. Latham: That is a very neat epithet to describe the contribution of the hon. Member for Honiton.

Mr. Alan Clark: If in some happy circumstances another £1,000 million were to be spent on defence, would not that be reflected immediately in the country's employment position?

Mr. Latham: I shall deal with that in a moment. I intend to come to it presently, and I am sure that you, Mr. Deputy Speaker, would prefer me to make my remarks in the order which I had intended originally.
I shall have no hesitation in voting against the Tory motion and, so far as I know, no hon. Member on the Government Benches will fail to go into the "No" Lobby at 10 o'clock. To vote with the Opposition would be like turning aside a bad meal and taking a dose of arsenic instead.
My right hon. Friend the Chancellor of the Exchequer was generous enough to refer to the good intentions and appalling performance of the previous Administration. Many of us will not feel especially charitable towards the Opposition in the light of what we have just heard from the hon. Member for Honiton. I think that many of us feel that the intentions are likely to be appalling as well. It is clear from what the hon. Member for Honiton said and from various pronouncements made by Opposition Front Bench spokesmen that their alternative policy would be to butcher public expenditure and put up unemployment by between 1 million and 2 million. In addition, we have their defence commitment.
I wish to make it clear, however, that in supporting the "Noes" tonight against the Tory motion, those of us who do so will not be voting for the cuts which the Chancellor announced on 22nd July. It needs to be underlined that there is a real debate being conducted on the Government side of the House.
I also wish to repeat what I said in my earlier submission to Mr. Speaker. It is deplorable that it is not possible for a distinctive point of view to be tabled in the form of an amendment which would have been called and could have been

voted upon. If that opportunity had presented itself, there well might have been not merely the 70 hon. Members who have subscribed their names to the amendment on the Order Paper but 100 or possibly 120 Government supporters who would have wanted to express their support in the Lobby for the terms of the amendment on the Order Paper not called and ruled out of order by Mr. Speaker.
The fact is that the Opposition chose to revert to the old form of Supply debate instead of adopting the newer form which would have enabled them to put down an amendable motion. They have jeered at the Government for not submitting a motion in support of their proposals for public expenditure cuts, but they themselves have denied many hon. Members the opportunity to express an alternative view in the Division Lobby. I do not understand whether it is ineptitude on their part or some deliberate act which leads them to use a procedure which makes sure that there will not be any expression of an alternative view by many Back Benches.

Mr. Heseltine: If the Government had had their way, there would have been no opportunity to debate these cuts at all. It is unprecedented for a Government to come to the House with a financial statement of this kind without giving any opportunity for debate. It is only because the Opposition, in their own Supply time, have made time available that the hon. Member for Paddington (Mr. Latham) and his hon. Friends have an opportunity to utter a single sentence in this House.

Mr. Latham: It is also unprecedented for a Chancellor of the Exchequer to announce in July what he proposes to do in his Budget of April the following year. Therefore, when the Prime Minister wanted to argue that there was time, there may have been some truth in that. But certainly many of us will have the opportunity—and will take it—after the Recess to vote against specific Orders implementing certain of the cuts, especially those relating to health charges, higher school meal charges and such other matters as may require specific parliamentary authority.
What the hon. Member for Henley (Mr. Heseltine) says does not detract


from the validity of my point that the Opposition deliberately chose a form of motion which was unamendable and, therefore, denied us the opportunity to express our own opposition from this side of the House.
Over the weekend, my hon. Friend the Member for Tottenham (Mr. Atkinson) has been quoted as making some reference to the alternatives facing people like him who are on the Left in this argument about cuts and the debate in this House. Obviously, my hon. Friend will speak for himself if he is successful in catching your eye, Mr. Deputy Speaker. However, I wish to make it quite clear that none of us who are associated with my hon. Friend the Member for Tottenham accept either in principle or in detail the cuts which have been announced by the Chancellor of the Exchequer. I have no doubt that my hon. Friend will have an opportunity to make his position quite clear later in the debate—

Mr. Atkinson: Since my hon. Friend has raised the matter, perhaps he will allow me to do so now. I have devoted the whole of my adult life to arguing the case for increased public expenditure. I hope that no one will misunderstand anything that I may say as advocating the acceptance of any cuts in public expenditure, and certainly not those now proposed.

Mr. Latham: From time to time in recent weeks the Chancellor of the Exchequer has justified his intention to propose cuts at times on the grounds of continuing the economic strategy set out in the White Paper earlier this year, at times in relation to the size of the Budget deficit, and at other times in relation to issue bearing upon confidence in sterling. Today, he concentrated again on the argument about the Government's economic strategy. It is well-known that many Government supporters question the whole of that strategy, which is that it is possible to achieve some stimulus in private manufacturing industry simply by reductions in public expenditure and the provision of community services.
First, that makes the assumption that all or any manufacturing is better than service. But I argue that what we should be asking ourselves is manufacturing for what and for whom and relating that in

terms of priorities to what service and for whom should that service be provided.
The argument about the desirability of transfer is plausible if it is seen in the context of a balance of payments problem. But, despite many questions and challenges, at no time has the Chancellor or any of his colleagues answered our question—by what mechanism is that transfer to be achieved. There is no evidence which we can find that, despite the assertions of the Chancellor—we have had a series of assertions rather than arguments or evidence—there is any indication that this has happened so far.
This month, we have an unemployment level of 1·4 million. There appear, therefore, to be plenty of human resources available. No evidence has been produced about a shortage of materials, and we all know that money is available for investment but not being invested, as was corroborated by an intervention just now from an Opposition Member. So again, ever hopeful, I ask the Treasury Bench to suggest to us by what mechanism the transfer of resources is expected to be achieved. Specifically, and with a strong eye on constituency problems, what possible advantage can be achieved at this time by worsening unemployment in the construction industry, which will rise from 200,000 to more than a quarter of a million?

Mr. Frank Allaun: Is my hon. Friend aware that the figure is now 260,000 if we include the related trades of brick, glass and timber?

Mr. Latham: What my hon. Friend said makes the situation even worse. We shall have to add the unemployment consequences of building fewer roads, cancelling new hospitals, not building new schools and building fewer houses. This is a contradiction arising out of the system which a radical Labour Party should be seeking to overcome rather than succumbing to, as is evidenced by the cuts which have been submitted, because the new hospitals, schools, and particularly houses, will still be needed whenever the upturn comes.
Judging by the social contract, we are not thinking of unemployment going to what the Government might regard as a more acceptable figure in less than


about three years. That means three more years without the hospitals and the schools that we need and three more years on the waiting list for those in need of housing accommodation. It is extremely difficult to explain to constituents that somehow accepting those hardships will contribute to future national prosperity.
It may be argued that the Chancellor has announced that housing will not be cut in stress areas. But the local housing situation is affected by the overall position throughout the country. A reduction in the size of the building programme must clearly have adverse effects and bring greater pressure on stress areas.
I wonder whether it is being argued that the construction industry is too large. We know that it is not the most efficient industry, but surely the cuts being proposed will do the opposite of helping. It would be far better if those destined to be unemployed in that industry were able now to build the hospitals, schools and houses that we need rather than to be on the dole. This is one of the major contradictions in the financial and economic system under which we live.
Similarly, we are to have fewer teachers employed. Are those teachers to give up teaching? Are they to be lost to the profession? Are they to remain unemployed meantime? Are the Government abandoning as a long-term objective improvements in education, particularly reductions in class sizes? If not, the idea that we can contribute to future national prosperity by transferring teachers from teaching to some other kind of occupation is clearly a nonsense. That seems yet another contradiction in the strategy that the Chancellor now claims to be following.
I should like to ask the Government Front Bench a specific question about the borrowing requirement. If the arguments that the Chancellor was using previously about confidence in sterling and the size of the borrowing requirement are correct, the fact that it is reduced by £2,000 million out of £12,000 million still leaves £10,000 million as the public sector borrowing requirement.
What do the Government regard as an acceptable and permissible size of budget deficit? Is there not a distinction to be drawn between borrowing to re-lend and

the financing of capital rather than of revenue expenditure? I am unable to establish from the public expenditure tables published thus far what proportion is for re-lending and for the financing of capital expenditure, and, therefore, could be justified by borrowing in terms of a budget deficit
The Government knows that, because the issue of confidence is imprecise, because it is not specific and because it relates to feelings rather than to facts, many Labour Members see no reason why, within a few months, there should not be further demands and pressures so that the Chancellor will have to come along with an even more unacceptable package than that which has just been presented. In some of the earlier consultations leading to this package the Chancellor referred to borrowing to finance the balance of payments deficit. I wonder about that.
On the face of it, we might have supposed that, certainly in the short and medium term, a deficit on the balance of payments could have been self-financing in that it would result in large sterling holdings being held in the capitals of those countries with which we were in trade. The Chancellor has argued that it is necessary to borrow for that purpose. I should welcome an explanation of how he adduces that argument. I certainly seek confirmation that if for any reason it is thought necessary to borrow abroad to finance the balance of payments deficit, that borrowing will not be additional to borrowing for the public sector borrowing requirement, but will make a contribution towards the budget deficit at the same time.
What is broadly called "the Left" has been asking for controlled reflation. Instead, we have got what is, in effect, a £2 billion deflation. Part of the argument for the regulation of imports relates to the call for at least some controlled reflation, because without control it would be like trying to fill a bath from a running tap with the plug out.
I put three specific questions to the Government. First, do we, as a Labour Party and Government, still believe in planning? If so, why are imports to be excepted from that general plan?
Secondly, what efforts are being made regarding import substitution which, I should have thought, could make a far


greater contribution to relieving the balance of payments problem.
Thirdly, if we were to set limits on imports country by country, why should we fear retaliation? If we sought not to reverse but to reduce the balance with those with whom we are in deficit and they still remained in surplus in their trading accounts with us, why should that lead to retaliation from them?
Broadly, those of us who have supported the amendment on the Order Paper object to the methods being used and also believe that they will not work. We think that eventually the Chancellor will have to take steps to determine the size of the import bill, to ensure that investment is made, and in the right places, to limit the flow of capital abroad and to mobilise overseas assets in the interests of the British people as a whole.
Clearly, there is a limit to the forbearance of the ordinary Labour voter. We believe that the Chancellor will again feel the need to act within a few months. We urge him to use that time to make up his mind to introduce and resort to positive alternative Socialist measures.

6.39 p.m.

Mr. Richard Wainwright: The hon. Member for Paddington (Mr. Latham), speaking no doubt as the voice of more than 70 hon. Members, has drawn the Government's attention to the savage way in which many of their cuts have borne on capital expenditure—for example, the replacement of worn out hospitals and antiquated schools. I hope that the Government have noticed that, by going for the soft option of allegedly cutting capital schemes, they have attracted serious criticism from their own supporters.
However, surely the most notable feature of the debate so far, which I suspect will continue for most of the evening, is that not one Back Bench speaker has spoken in support of his own Front Bench. Every speech has been dissenting in that way. This surely adds point to the very proper and timely protest of the hon. Member for Paddington at the way in which the debate has been structured. It is a great disservice to parliamentary democracy that on a matter of this consequence to all of our people the debate should be so structured, as the

hon. Gentleman pointed out, that none of the various parties and groups sitting below the Gangway, on both sides of the House, is able to have a vote to express its point of view.
I can speak only for Liberal Members. However, there are at least 120 Members who are members of either quite separate parties or increasingly separate groups. That figure takes no account of developing schisms in the official Opposition, which have been so clear today, as expressed by the right hon. Member for Taunton (Mr. du Cann) and the hon. Member for Honiton (Mr. Emery).
This surely demands that the Leader of the House should take care that a matter of this consequence is debated in a manner that allows at least one minority group the opportunity of expressing by a vote its own point of view. None of us has ever asked for more than one at a time. The Liberals are prepared to take turns in these matters.
The complaint of the Liberal Party about these cuts and the way in which they have been framed is not so much one of inhumanity or of breach of faith with the CBI. It is the fact that to the rest of the world, from which we have borrowed fantastic sums of money and which is already very distrustful of us, our Government now appear manifestly incompetent. The index of that is not entirely the continued weakness of sterling—which, although important, has been overdone a little in some comments—but the appallingly high rates of interest which have to prevail in order to sustain our credit at all. Historians will think it ludicrous that earnest parliamentarians have spent so much of this summer discutting the desperate need to invest when the cost of the money that we are borrowing to invest is fantastic.
I have found no one in Britain—although I have found a few American industrialists, for reasons of their own—who is willing to invest seriously in my highly industrial constituency so long as interest rates are at the present absurd high. That is the direct consequence of the low standing of our credit overseas. This is a worse symptom of the Government's incompetence than the nervous state of the pound. It is no good propounding remedies for that which would take five years to unwind. We are in a position now in which we desperately


need to invest. Therefore, we must take measures to reduce the prevailing rates of interest.
Our incompetence, as seen from abroad—and that is what matters here—comes under various headings. First, we are known abroad as the country of the zigzag Government. It used to be thought that the zig was one party and that the zag was another party. However, this is no longer, alas, the whole of the mischief. There is now zigzag within one Government and between one season and another, because the zig that was in the Budget and the Government's famous Chequers strategy and so on—a prospering mixed economy and having a pact with the CBI—has suddenly, during the same summer, before even the drought had begun, become the zag of placing a hastily improvised new tax upon employers. This gives us a reputation abroad for extreme instability.
Then there is the much advertised lack of control over public spending in both the Whitehall sector and the town hall sector. The Government are struggling to get control of their own expenditure. I am very willing to pay tribute to Treasury Ministers for an effort long delayed. They are doing this by bringing matters down to a basis of cash, rather than indexed costs.
However, local government expenditure is still wildly out of control and the Government have not yet hit upon any method of penalising the spendthrift local authorities and giving a fair deal to those diligent local authorities—no matter which party controls them—that have conscientiously and efficiently reduced their expenditure in accordance with national demands. I have a great fear that some of the thriftiest and most well-administered local authorities will suffer just as much as the well-known spendthrifts when the Government start to apply their medicine.
Then there is the Government's conspiracy with Whitehall to resist outside independent efficiency tests. Most depressing evidence has been given to the Expenditure Committee during the last few days about how the Inland Revenue behaves towards the suggestion of outside efficiency experts—with just the same narrow, parochial jealousy as an old-fashioned board of directors, when asked

to introduce outside consultants, saying "Our affairs are so complicated and the whole thing is so ramified that our own people know how to put us in order and it would not be much good asking people to come in with the cold light of an independent stance."
We must submit every branch of government to the discipline of outside efficiency audits, even though sometimes, as with all such independent investigations, some of the criticisms may miss the mark. But many will strike home and could save a great deal of money.
Another disreputable habit of the Chancellor which is bound to damage our credit-worthiness abroad is his habit of throwing off commitments, in the most irresponsible way, on to the shoulders of other people. There was a classic example of this. Hon. Members will remember that in the Chancellor's statement about the cuts, having dealt a devastating blow to mortgage chances for people able to afford only a modestly priced home, he calmly threw the whole burden on the shoulders of the building society movement without having the slightest idea whether that movement was willing to take it on. That is an irresponsibility that has caused comment. Before long it will cause a great deal more. In the meantime, it will have raised, only to disappoint, the hopes of many people of getting a modest home of their own.
The underlying theme of these cuts and the big question behind them is how much unemployment they will add to the already wretched total. I am bound to say that today and in his earlier comments the Chancellor has been either woefully complacent or deliberately deceiving. It seems clear that the Government are relying more and more upon the crude weapon of unemployment to enforce their policies on pay and so on, and that beneath the facade of great concern for the unemployed they are ensuring that the weapon shall remain potent throughout the rest of this decade.
Their target—it was their target—was 700,000 registered unemployed by 1979. However, if we are to believe half of what we are told by the Expenditure Committee's expert, Mr. Ward, there is no chance of unemployment being significantly reduced from its present figure


by the end of 1977. That means that if the Government's proclaimed target is to be achieved, over 1 million new jobs will have to be created in the incredibly short space of time of the years 1978 and 1979.
The Government may have an answer to Mr. Ward. They have not always had one in the past. This is a major point on which he should be answered during the Government winding-up speech this evening.
However, the greatest failure, which we on the Liberal Bench would wish to press home if we had the opportunity of a vote tonight, concerns the total lack of leadership in the whole of our circumstances. After all, what prevents the Government from giving a great lead? They are not worried or harassed by a powerful official Opposition. They no longer appear to be very worried by the Tribune Group—perhaps they have not much reason to be. They have certainly no need to be worried by the petulance of the CBI, because industry does not give a damn whether it gets a letter from Lord Watkinson. Many of my industrial constituents do not even bother to belong to the CBI. It is a very expensive organisation. Unencumbered by any kind of hindrance why do not the Government give the nation the lead for which it is waiting?
During the weekend I met in my constituency a very well known public servant on the leisure side of things. She was an admirable woman. She was talking about the difficulty of the cuts and said to me that Colne Valley was not built by, and would not be rebuilt by librarians. She is one herself. She was indicating that, admirable though her profession is, we have to transfer a majority of people into manufacturing before we can hope to rebuild our national wealth.
This is an opportunity for the Government to have announced a major retraining scheme. It is no good encouraging that lady to get into manufacturing if there is no one to train her. We want a major retraining scheme, not just for school leavers but for a large number of our bureaucratic population, to get them into the manufacturing drive. Until that happens, we shall be bound to oppose the Government.

6.52 p.m.

Mr. John Horam: There has been a tendency to justify the Chancellor's measures on the ground that they are necessary to placate our foreign creditors. I have even heard a whisper to this effect from the Treasury Bench itself during the last few weeks. However, I would have regarded the measures as prudent even if we had no foreign creditors at all. The plain fact is that while a public sector deficit of the size we have been running is justified in terms of recession, it is bound to lead to all sorts of damage to the economy, both in the short term and in respect of our longer-term hopes for improving it, if we carry that deficit on into a period of rapid upturn—even though I doubt that the upturn will be quite as rapid as the Chancellor has suggested.
In addition, but for the cuts, I hazard a guess that we should have had increases in taxation at a time when we are taking no less than £750 million a year from people who are on supplementary benefit level, that is, below the official definition of poverty. Also, I believe that private consumption would have risen only slowly, if at all, in the immediate future if we had not had the sort of rein back in public consumption. We have heard a great deal of the "social wage", but surely it is the "real wage" which must still be our primary concern. I therefore support the Government's approach.
Other countries, which have not got our problems on the balance of payments front, and which have ample reserves, such as West Germany, are cutting back their public expenditure deficits at a rate that we are now beginning to approach. They see the damage to the economy, whatever their particular brand of politics, that could occur from allowing this sort of situation to carry on in the way that we were proposing before these cuts. The cuts are, therefore, justified.
I am also glad that the Government have adopted a rather more discriminating approach than has often been the case in the past. However, in one respect the Government have made a serious mistake, which has been referred to repeatedly since the cuts were announced, and it is in cutting back local authority mortgages.


That is a classic example of the way Whitehall thinks it has solved a problem, in this case by passing the buck to the building societies, when in fact nothing on the ground has actually changed.
I believe that houses that could provide decent first homes for low-wage people will continue to stand empty until the building societies are pushed into doing something serious about the matter. If they will not do something serious, some measure must be brought in to control the lending policy of building societies. In other words, the Government must make this a high priority over the next six months or gratuitous social damage will have been done.
Having declared my view on the cuts, I would make a few remarks on the alternative strategies which have been advanced both by the hon. Member for Honiton (Mr. Emery) and my hon. Friend the Member for Paddington (Mr. Latham). I remember my hon. Friend the Member for Paddington with much respect because when he and I were both on the Housing Finance Bill Committee he made a speech for four and a half hours, stretching from about 10 o'clock at night to about 2 in the morning. He spoke considerable sense on that occasion. However, I cannot absolutely follow the logic of his argument today. I hope that the Chief Secretary will answer some of my hon. Friend's specific comments.
The thrust of the alternative strategy is the policy of import controls. My hon. Friend put various questions to the Chief Secretary. I should like to pose some questions to my hon. Friend. If we advocate import controls, we have to ask ourselves, first, whether the total that we could cut would really be sufficient. Total imports are now running at about £25 billion a year. About £12 billion of this accounts for essential foodstuffs and raw materials that could not be limited by import controls. Another £7 billion account for semi-processed goods and finished machinery required by industry and we could not impose import controls on these without producing bottlenecks.
We are therefore left with roughly £5 billion—about one-fifth or 20 per cent. of our total imports—that we could effectively control. Is this amount large enough to have the sort of effect on the balance of payments situation that we

want in the future without imposing Draconian controls that would certainly cause international uproar?

Mr. Sedgemore: Will my hon. Friend explain what he thinks about the current policy in relation to increased depreciation of the pound? If the Government are serious about export led growth and if they are to deal with the balance of payments problem through their economic policies, the likelihood is that they will have to allow the pound to depreciate by between 20 per cent. and 25 per cent. over the next three years. What is that if it is not a policy of import controls?

Mr. Horam: Import controls and devaluation have always been alternatives. The fact is that we have had a massive devaluation in the last six months and it remains to be seen whether it is sufficient to carry through the Government's strategy. It may well not be enough. Most forecasters are now indicating that, post cuts, we should expect some reasonable balance in sterling in the foreseeable future, but I cannot answer my hon. Friend's question, simply because it is hypothetical.
The second question is whether we have the physical capacity to supply the markets that would open up if we imposed controls. If I remember rightly, the car industry resisted even quite small budgetary measures on the ground that it could not supply the markets, especially in the case of many of the smaller cars, and that that would lead to larger imports. Even the NEDC sectoral studies, discussed recently, have indicated that supply constraints will occur at a very early stage in the recovery. There are bound to be shortages and queues and even higher prices as a consequence.
Thirdly, if we have import controls, have we a guarantee that at the same time we shall attack our central problem, that is, the problem of efficiency and enterprise? This also is a matter of judgment—indeed, most of the matters raised or implied by my hon. Friend the Member for Luton, West (Mr. Sedge-more) are matters of judgment—but I think that most historical experience suggests that protected economies are not, by and large, efficient economies.
Fourthly—perhaps this is the most crucial and it was referred to by the


Chancellor today—if we impose considerable extra demands on industry because of the enhanced demand to which import controls would lead, should we not have to cut public spending even more to avoid the inflationary consequences that would otherwise follow? I believe that we should. Obviously, the Chancellor thinks so too, and he said so today. As a matter of fact, so do the eloquent advocates of import controls at the Department of Applied Economics at Cambridge. Indeed, when they originally advocated import controls last year they said that their policy would necessitate public expenditure cuts even larger than those which have since flowed from the Government's hands.
If import controls are advocated as part of a strategy of that kind, I should not necessarily disagree. I think that import controls have a rôle, as in effect my hon. Friend the Member for Luton, West suggests, as a subsidiary part of a strategy in which one fears that the economy may not be strong enough to stand the medicine which one thinks it necessary to give it. That is why we used the import deposit scheme under the last Labour Government and why we may have to resort to measures of that sort again. No one can be sure.
However, that is not what the Left wing of the Labour Party is arguing. Its argument is for import controls and no cuts in public spending. Indeed, before that it argued for import controls, no cuts in public spending and no restraint in collective bargaining. And that is the flaw in its argument—it wants a soft option. Those on the Left are not prepared to face the hard realities of Britain at this time. So, although they argue their case with sincerity, with conviction and with a good deal of admirable energy, I remain unconvinced.

Mr. Bob Cryer: Will my hon. Friend accept that the Left of the party, as he graciously calls us, have been arguing strenuously for cuts in defence expenditure, which is part of public expenditure? Also, will he accept that there is a variety of views about incomes policy and some of us believe that some form of incomes policy is necessary?

Mr. Horam: Yes, and I acknowledge—I am sorry to refer to him again—that

my hon. Friend the Member for Luton, West has argued that in one of the original Tribune pamphlets—it was deep in the heart of it: it was difficult to search it out, but there was some sort of advocacy of an incomes policy. I wish that at the time—we were discussing voluntary restraints—he had spelled the matter out rather more clearly. One had the impression that others were against it, but I accept none the less that there is some such strand of argument in the policy of the Left.
However, surely it is clear from the views of my hon. Friend the Member for Keighley (Mr. Cryer) and others that they are against a total cut in public expenditure. They may want a cut in defence expenditure certainly, but overall they are against any total cut in expenditure.

Mr. Atkinson: We want an increase.

Mr. Horam: My hon. Friend wants an increase. Well, that would offset the cuts which others of my hon. Friends want to make in defence expenditure, so they cannot sustain their argument on expenditure, although they may be able to sustain an argument for some voluntary restraint on the wages side as a quid pro quo for import controls.
The other strategy that we have had advocated in the debate is that set out by the official Opposition, elaborated at some length and in more extreme form by the hon. Member for Honiton. Here also there are some questions to be posed. First, for all their espousal of a tough monetary and fiscal policy, would the Opposition implement it in practice? Neither of the last two Conservative Governments—not even the Macmillan Government, let alone the Government of the right hon. Member for Sidcup (Mr. Heath)—was exactly a paragon in this respect. In the last economic debate, the right hon. Member for Sidcup said that if one took M1 alone one could show that his Government were not quite so fiscally profligate as we have always contended. But that is not the only piece of evidence, and I do not believe that he entirely convinced his listeners at the time.
When his Government first took office in 1970, there was a good deal of talk about cutting public expenditure, and I remember thinking to myself that, if they


cut Concorde, I should really believe them. I was quite safe: they did not cut Concorde despite an eloquent speech by the hon. Member for St. Ives (Mr. Nott), who subsequently joined the Government, whereupon even M1 leaped to new heights.

Mr. Lawson: Will not the hon. Gentleman agree nevertheless that under the last Conservative Government public expenditure never rose higher than 52 per cent. of gross domestic product, whereas it is now over 60 per cent.—a substantial difference?

Mr. Horam: I agree, but the point is that, in spite of what they said at the time, they did not subsequently follow their policy through. After their panic reaction to the high unemployment figures in the winter of 1972 there were extremely high levels of public spending, according to the standards of the hon. Gentleman and his hon. Friends at that time. In fact, it is difficult for all Governments to resist calls for higher expenditure, and this ought to be admitted by the Opposition in view of what they did in office and what they say now about their Draconian measures.
Next, even supporting that the Opposition carried through their cuts, what would be the implications for unemployment? The right hon. Member for Leeds, North-East (Sir K. Joseph) made a dramatic intervention in our debate today, saying that they would restore confidence to such an extent that the consequence of their cuts would be higher employment, not higher unemployment. I concede that there is something in that argument, but they did not do it last time. There was higher unemployment, resulting eventually in the sort of panic-stricken measures to which I refered in reply to the hon. Member for Blaby (Mr. Lawson). That is what happened last time, and the Conservatives were not able to create the kind of confidence which they blithely talk about as a result of their extreme approach to this situation.
The official Opposition ought to tell us more about their policy. They offer no guarantees. They ought to spell out far more often and more clearly precisely what they would do about the disastrous unemployment situation which we now face whichever party is in power. They ought to tell us far more. We hear very

little from the right hon. Member for Lowestoft (Mr. Prior) about that.
Thirdly—I regard this as fundamental—would the Opposition, if they did follow through their policies, be able to hold the country together? Could they provide the sort of united leadership which the country needs? Have they enough insight into all the various social groups which compose the nation and which need to be taken into account? Again, they failed last time. Everyone knows that. They have a serious problem of confidence within themselves, and a problem of credibility to overcome if the measures which they have in mind have any hope of being accepted.
That leaves us with the approach adopted by my right hon. and hon. Friends in the Government. In my view, it is viable, but as I have said before, and as I have no doubt that I shall have to say again, they will need to pursue their policy with boldness and with radicalism. The boldness has increased dramatically in the past six or 12 months. The radicalism is still rather thin. To mention but one area where radicalism will certainly be needed, I instance unemployment. I do not believe the Government's forecasts for unemployment. I believe that it will continue at a higher rate, not higher than it is now, but higher during a boom than we have even so far experienced.
That is the central problem, and the Government will not be able to solve it by orthodox demand management measures. As the hon. Member for Colne Valley (Mr. Wainwright) hinted, it will require intervenionist policies of some kind. Obviously, one cannot spell them all out in a 15-minute speech, but it will require the sort of planning approach which has been advocated by my hon. Friend the Member for Paddington and the the hon. Member for Colne Valley. I believe that that is the only way we can meet the sea change, as it were, which faces our mixed economy at present. I urge my right hon. and hon. Friends to consider that problem seriously. It should have the highest priority in the thoughts of my right hon. Friend the Secretary of State for Employment as well as of the Chancellor and the Prime Minister.

7.9 p.m.

Mr. Donald Stewart: Time does not allow me to take up many


of the points made by the hon. Member for Gateshead, West (Mr. Horam), and for that I offer him my apologies, but I wish to associate myself strongly with the protest made by his hon. Friend the Member for Paddington (Mr. Latham) and the hon. Member for Colne Valley (Mr. Wainwright) about the difficulty facing minority parties or groupings in having selected any motion or amendment. Ours is no longer a two-party system in the House, and it is time that the appropriate Committee recognised that. Let us hope that, when we resume the next Session, that difficulty will be overcome.
In passing, I must express entire agreement with the right hon. Member for Battersea, North (Mr. Jay) in what he said about the deafening silence on both his and the Tory Benches about the effect of EEC membership on the position of the United Kingdom today. If we had stayed out of the Market and it had been a booming Market we would have been reminded of it every day. Those of us who are against it would have been reminded about it in every speech.
My hon. Friends and I have tabled an amendment which will not be called. It deals with the Scottish context, and I shall deal mainly with that in my speech, for which I do not apologise. We repudiate entirely the need for cuts in public expenditure in Scotland. However, there were certain measures announced at the same time which the SNP could welcome, and indeed for which we have been pressing for some time.
We are glad to see that the Government have been more selective in regional development grants and will no longer be boosting the profits of the multinational companies at the taxpayer's expense. We welcome the equalisation between men and women of the regional employment premium. It should have been levelled up to the male rate of £3 instead of down to £2 as proposed. This could have serious effects for certain firms in Scotland and, no doubt, elsewhere in the United Kingdom. I know of one Scottish firm which has more than 2,000 workers of whom only 100 are female which will have a reduced regional employment premium. It must also pay the new payroll tax. This will create a serious cash flow problem in the months ahead.
We welcome especially the commitment to increase the funds of the Scottish Development Agency. However, we reserve judgment until we hear what the amount will be. The Secretary of State for Industry was very coy about that in the House this afternoon. I shall quote from the latest economic quarterly of the Fraser of Allander Institute which illustrates how necessary it is that increased funds are made available to the Scottish Development Agency. It states on page 20:
Present circumstances pose a challenge for the Scottish Development Agency. It is the only instrument available with which the Government can bring about a sustained increase in the level of productive investment in Scotland. If it succeeds it will make possible a higher level of employment in the future. If it fails the outlook for the next two or three years is bleak.
If the Scottish Development Agency is to be as successful as this quotation indicates it could be, funds of £2 million or £3 million per annum must be released to it.
The rest of the Chancellor's package is an affront to every Member from Scotland with a social conscience. Certainly no SNP Member is in Parliament to accept calmly cutbacks in geriatric care, reduction in housing expenditure, the deferment of pensions for disabled housewives, hitting low income groups through phasing out food subsidies and increases in the cost of school meals, to mention a few of the retrograde and reactionary proposals.
The effects on Scottish industry could be very serious indeed. How will the cuts and deferments in grants and loans to the fishery and forestry industries help investment there? How will the disappearance of lime subsidy—of special importance to Scottish farming—increase food production? Long-term damage is being done for minimal current saving.
What about the impossible obstacles for young married couples in the restrictions on local authority mortgages? The Government say that building societies have promised to help, but they promised to do this last October and nothing or very little has been done about it.
The cuts in the social services are the cruellest of all. Britain, after Ireland, spends least on social services of all the EEC countries. Housewives are worried about the rising food and fuel costs and when the green pound is adjusted food


prices will inevitably rocket. The doubling of the charge for dental treatment is barbaric. Bad teeth are responsible for a lot of ill health. A country is bankrupt not only of money, but of ideas and consciences, that can waste its substance on Concorde and put dental treatment out of the reach of many citizens.
Government's underestimate the contribution that the working population is willing to make to ensure a decent life for old-age pensioners, the disabled and other needy members of the community. However, they have to be certain that their sacrifices will be used to that end and do not disappear into the kitty to pay for circuses of various kinds.
The Government's reasons for the cuts were to impress their creditors, to free resources for industrial investment, and to restore confidence in sterling. None of these has been achieved. The creditors remain unimpressed and the Government will inevitably have to turn to the International Monetary Fund and to borrow on its stringent conditions. The CBI is telling its members not to invest and foreign banks are still refusing to buy sterling.
The outlook for the United Kingdom is grim. A different picture can be painted in Scotland. The growth rate in Scotland is two to two and a half times the growth rate of the United Kingdom as a whole. Oil will be worth £3,000 million per annum in a few years' time. We are weighted down by England's bankruptcy. In a free Scotland it would be different. We oppose the cuts and we shall vote for the Opposition's motion.

7.17 p.m.

Mr. Norman Atkinson: In the debate and in the Press we have been treated to a great deal of fictitious theory about the money supply and other unsubstantiated theories. The monetarist leadership of the Opposition still indulges in these theories as though they are an explanation for the difficulties from which we suffer.
Before I make some comments about unemployment, about which I am most concerned, I point out that it has been our experience that money supply in no way influences demand. Although the monetarist leadership of the Conserva-

tive Party has always claimed that excess money supply has been responsible fin inflation, our experience has proved the opposite. Prices have not risen as a result of excess money supply. There has been no increased demand in the economy. No price increase can be traced to that source. Increased monetary supply has not affected wages, because the level of demand has not been raised.
Likewise, money supply has not influenced profit. Therefore, the whole thesis on which the Opposition base their case is fallacious, and our experience proves it.
The effect of money supply on the economy has been to increase imports, and that I readily concede. That is part of the case which we have advanced for the imposition of import regulations to prevent the transfer of excess money supply to increase imports beyond that which the economy can support.
Likewise, there has been a boom in property investment as a result of excess money supply. However, it is certain from our experience in recent years, that money supply is not at the core of or basically responsible for some of the things attributed to it by the Opposition. The Chancellor of the Exchequer and other leading members of the Government have claimed that it is their intention to increase the number of new jobs by 1 million over three years. It is pertinent for us to inquire how that can be done. From where will the jobs come?
The Chancellor and other members of the Government, including the Prime Minister, do not face up to the fact that the public sector, and particularly the local authorities, will not increase their work force in the next three years. It is implicit in the figures produced by the Government that there cannot be an increase in the work force of local authorities. All of the great public corporations are talking about reducing their work forces. The greatest work force reductions of all are to take place in the steel industry. Therefore, in aggregate, the Government are saying that there will be no work force increase in the next three years, and the local authorities, in particular, must accept that there is a freeze on the number of people employed. In fact, it is expected, as a result of the


new restrictions, that the total local authority work force will decrease.
If we analyse the NEDC reports on manufacturing industry and consider carefully the comments made by employers throughout the country, we find that all of them seem to be backing the claim of the Opposition that, in the main, manufacturing industry is over-manned. If that is so, the challenge to the Government is much greater than we thought and the problem is much greater than is acknowledged by the Government. Much of the promised investment is such that it must reduce the labour content of those industries in which it is scheduled to take place. I am thinking particularly of manufacturing industries which produce capital goods. Every employers' report that I have read suggests that they will increase their output but with a smaller work force over the next three years.
It is a massive challenge to the Government and to ourselves to say where the increased number of jobs will be found. I am sure that we would all be fundamentally opposed to the idea of jobs in bingo halls and in other inessential activities and the suggestion that by carrying out tinsel operations of that sort we shall create more jobs. That would be totally wrong in terms of the recovery of the economy and of the Labour Party's programme. Therefore, where will the extra jobs be found if they are not to be found in the public sector?
I base my case on increasing public expenditure so that we can make provision for increasing stocks and to enable manufacturers for the time being to put essential goods on the shelves until the upturn comes in order to avoid obvious bottlenecks. The Government should intervene in the economy to ensure that areas of manufacture which are capable of producing additional jobs have the resources to do it and, if necessary, should put the finished goods to one side until they can be slotted into the upturn. That is the way to start the essential planning.

Mr. David Mitchell: rose—

Mr. Atkinson: I shall not give way because I have agreed to be brief. I do not like refusing to give way because this place is about debate.
We can solve our immediate problems by the use of public resources. That leads me to the attitude of the CBI and its refusal to circulate its members with a call for additional investment. That is tantamount to direct sabotage of our whole industrial situation. If the CBI is serious in what it says, the Government have no alternative but to devise ways of directing capital. They cannot do other than that. That is the fundamental issue which the CBI must face. If it continues to say that it is not prepared to intervene to ensure that manufacturing industry has adequate capital to do the job that we want it to do, the Government have no alternative but to direct capital to those areas which must develop so that we may fulfil the programme on which the Government were elected.

Mr. Tom King: rose—

Mr. Atkinson: I shall not give way because I wish to finish in a few minutes.
Incidentally, the proposal to transfer resources from the public sector to private manufacture is not possible. The Government have not the power to intervene in that way or to be selective about a shift of that sort. Furthermore, the most effective argument against it, is that the cuts go across the board. If there were to be some selectivity and if public expenditure were to be reduced so that manufacturing investment could be increased, there would be some substance in a Minister saying that the choice was between a hospital and a factory. But that is not the case. Expenditure as a whole is to be reduced and therefore there can be no shift.

Mr. Tom Litterick: There is no scarcity of resources.

Mr. Atkinson: There is no scarcity of resources. There is so much money sloshing about in the economy that manufacturers are now becoming institutions offering resources to other manufacturers. They are becoming lenders and almost secondary banks. It is known that such organisations as GEC have £100 million or £150 million at their disposal which they have refused to use. This is a remarkable situation.
Let me make one or two comments about the vote and some of the remarks


credited to myself. The Government have rejected the alternative economic strategies which have been proposed by many of us over quite a long time and have come to the conclusion that if those strategies are unacceptable to them they have no alternative but to pursue the policies that they have outlined. They have rejected import controls and much stricter exchange controls, together with currency regulations. They have also rejected the idea of adopting a much more rigorous approach to a pricing strategy.
Therefore, the whole of what has been described as the Left's case has been rejected by the Government and they are right to say that once it has been rejected they are left with no alternative. There is no third way. Therefore, the Government have said, through the Prime Minister and the Chancellor of the Exchequer, at meetings of the Parliamentary Labour Party, that they can survive only by accepting international credit. It has been acknowledged by leaders of the Government that if we go for international credit the Government must of necessity accept the terms laid down by the international creditors. That is what they are now doing.
It follows that those of us who have decided that we shall sustain this Government because the alternative is far worse must face the reality of the Government's present policies. If it is our fundamental purpose to sustain the Government in office, we are saying that, in principle, the conditions laid down by our creditors will be applied. The conditions laid down by the international creditors will start to affect our economy, and this is the policy that the Government, who are being sustained in office, are bound to pursue. That is the tragedy of the situation. I am sure that most of my hon. Friends totally reject the banker's conditions. In no circumstances would I accept them.
I recognise the problems that we shall suffer in the immediate future and that clear political leadership is needed to overcome them. It cannot be done in this place. I do not think that it is possible for a parliamentary decision to be taken that can reverse this Government's policies. The leadership of the Government have admitted that they cannot say that they have reversed their

policies because that would mean resignation.
We must consider how we can successfully change the direction in which the Government are travelling while maintaining them in office. This job has to be done in the TUC and the National Executive Committee of the Labour Party. That is the only way that we can bring about the change in direction without compelling the Government to go to the country.
That is our way ahead. We must make it possible for the TUC and the NEC together to bring about a shift in the direction in which the Government are going. Our work as Back-Bench Members of the Government should be directed towards that end. I hope that we can all play a part in achieving that aim.

7.34 p.m.

Mr. Kenneth Lewis: I wish to follow the hon. Member for Tottenham (Mr. Atkinson) only on his comments about the CBI. I am involved in a small business, so I do not think that the CBI could be regarded as one of my great supporters. The hon. Member said that the CBI was involved in sabotage because it had not sent to its members a letter about investment which it had previously proposed to distribute. But may I remind him that the Secretary of State for Industry wrote in the journal of the Institute of Directors recently that in order to get leadership from our managements, for the benefit of the country, we needed less secrecy and more consultation? Does the hon. Member for Tottenham realise that the Chancellor of the Exchequer imposed the 2 per cent. surcharge without any consultation with the CBI? This is exactly the opposite course to that which the Government take with the TUC. It was only to be expected that the CBI would have to take the views of its members before making a final decision on its attitude. It is doing this now before coming back to reconsider—in October.
It is highly appropriate that the Opposition should be proposing to cut the salary of the Chancellor of the Exchequer. If the right hon. Gentleman were financial director of a public company and had got his company into a financial state similar to that of the country, he would be given the sack.
The Chancellor has achieved the almost impossible. He has given us a £11 billion overdraft and 1½ million unemployed at the same time. I always thought that one could solve unemployment by the Government priming the pump. The pump has been primed as never before, but we still have this level of unemployment.
The rest of the world is inclined to judge a country on the basis of that nation's view of its Chancellor of the Exchequer and his Budgets and financial statements. The country will decide whether the Chancellor is a deliverer or a devil. Now it can be said that,
His jacket is red, he is trying to make his breeches blue, but there is still a hole where his tail comes through".
The world is doubtful whether the right hon. Gentleman is the devil that we on this side of the House believe him to be.
When a country is living on tick, it must expect to be judged by its creditworthiness. When a Government come into office, their duty is to consider policies on the basis of how things are and not how they or their friends would like them to be.
I am the first to admit that when the Government came into power they had problems left over from the previous Administration. Every Government have problems left over from their predecessors, but this Government not only ignored the problems but multiplied them.
They increased the deficit by £7 billion, multiplied the problems of the country by continuing with irrelevant and costly legislation. When a country increases the external debt while increasing internal overspending, those are signs of a lack of grip and slackness and weakness in government.
To rectify this situation requires action to test the fibre of the people. The Government have tenatively moved in that direction. There is a feeble sign in the recently-announced cuts, but they are too little and too late. Industry and business generally do not think very much of what has been done by Parliament in the last couple of years or of the tentative steps that have just been taken.
I have a foot in both camps. I run a small business. Nobody provided it

for me; I built it up myself. I know what unemployment is—my family and I were involved in it. Labour Members do not seem to realise that industry does not want unemployment. There is no future for business, whether it is small business or large business, in unemployment. If a business is having to shed its employees, apart from the sadness involved—if it is a small business and the employer knows the employees intimately, there will be sadness—it means that the business is not making any progress. It is either standing still or going backwards.
There is now a lack of investment because there is a lack of confidence. Once the unemployment figure begins to fall, there will be the beginnings at any rate of a return of confidence.
This Government have piled mistake upon mistake, prejudice upon prejudice, ill-advised concession upon ill-advised concession, and Left-wing policy upon Left-wing policy. Those involved in business—the little acorns, the grains of wheat that grow and multiply and become the bread that we have upon our table, the growth sector of industry—say "We have to pay for all the mistakes and all the overspending of this Government." It is like asking a racing driver to win a race when he is handicapped by having linked to the back of his car a lorry full of wasteful impedimenta. Such a race cannot be won.
Industry is also beginning to wonder whether we have a Civil Service with any emphasis on service. Britain used to have a Civil Service that was there to serve the Government. Labour as well as Conservative Members may listen from time to time to people on the television or radio who represent the Civil Service unions. They are no longer concerned about serving the Government. They are concerned to tell the Government what they should do, to dictate policy to the Government.
The Civil Service unions now tell the Government that they should spend more money, that they should increase the remuneration of civil servants, or inflation-proof their pensions, or that there must be no manpower cuts. Civil servants are now paid at the same rates as other poeple, but according to civil servants others can have the unemployment but civil servants cannot.
All this arises because civil servants are no longer controlled by decent individuals in the service who do a hardworking job. They are controlled by the unions. Those on the Labour Front Bench are supposed to be the political masters who dictate policy and say to the Civil Service "You will carry out our policy." Instead, they are now hidebound by the unions which are controlling the Government themselves. It may be that the Government will get control in the next week or month or two, but this has been the situation until now. This is one reason for Government expenditure running ahead, and why business and industry have found their bills increasing. The Government have lost too much control over their own diktat of policy. The House of Commons and the Government, not the Civil Service, should dictate the policy for running the country.
Industry also sees the taxpayer trying to help not only those who are the lame, the halt and the blind. On both sides there would be a consensus that we should help the truly lame, the halt and the blind. Industry sees the taxpayer having to provide for people, who through pressure groups, pretend that others are lame, halt or blind when in fact they art not lame, halt or blind. In other words, the social services have now spilled over to provide assistance for large numbers who could well look after themselves—all at considerable expense. There is plenty of scope for cutting the amount that goes out in the social sector, which is very wasteful.

Mr. Cryer: Tell us what.

Mr. Lewis: The fact is that the Government are spending more than industry can earn. It is industry that earns the money by which we pay for Government expenditure. The Treasury published some figures a few weeks ago which showed that losses on the nationalised industries were now balanced by the profits, so that all the nationalised industries were paying their way in total. Two or three of them were losing money and the rest were making money. A year ago, the nationalised sector was very largely losing money. The only profitable sector of activity in Britain, is the private sector.
If the pianist is knocked on the head the result is bound to be an indifferent tune. If industry is knocked on the head we shall get neither money nor output. Then, there can be no complaint if the Secretary of State for Employment has to announce that the unemployment figure is going up beyond 1½ million.
It is time that Labour Members began to talk realistically in public as well as in private. The Prime Minister is a moderate in private. He is by experience and inclination a realist. He is a realist but at the same time, as with many other Labour moderates, he goes along with much of the extremism which is given expression in Government policy. He talks about and supports the Chancellor in cuts in Government expenditure but at the same time puts through two or three Bills which will increase Government expenditure and further depress the private sector of industry.
No man can suck and blow at the same time. It is time that the Prime Minister and the moderates in the Labour Party decided where they stand if their Government are to survive for many months longer and if under them the country is to survive. It does not much matter whether Labour Members survive, but we are concerned about the country. The Government have to face the fact squarely that it is not good enough merely to talk in moderate terms. They will have to control those in the Labour Party who until now have been calling the tune through the legislative programme.
Only one thing will improve the performance of British industry, of the country, and of any Government. That is confidence. If there is confidence in industry, there will be growth and progress. There is no confidence in industry under the present administration. The Government are living on borrowed money and borrowed time. They will go out in due course. Then we shall have a change.
What does industry expect from my party if and when it is returned? Quite a number of research groups have been considering policy. I am always a little concerned about the findings of research groups, particularly when those findings are put into effect in this House. I believe that most of the findings of those research


groups should be left on the files. The next administration will have the duty to legislate as little as possible, to let industry and the people settle down. It would be better for the people if Parliament could have the maximum amount of time in recess and an economy of time spent in this Chamber. The longer our holidays, the better off will the people be. We have had a surfeit of indigestible legislation from the present Government.
The next thing that will be needed, with a new Government, is an ability to communicate, and that will be a mattes for my Front Bench, because although one may have the policy right, it is still necessary to communicate it. My advice to my hon. Friends on the Front Bench is that when we get into government they will need to prove to hon. Members opposite and to the country as a whole that we can present a Conservative Administration to the British people which is fully representative of them, not only in policies but in personalities.

7.52 p.m.

Mr. John P. Mackintosh: I look forward to the prospect of the next Government communicating with the people from the holiday resorts of the country, and I only hope that they make the sort of musical noises that the hon. Member for Rutland and Stamford (Mr. Lewis) wants. The speech that we have just heard is natural in the sense that hon. Members ought to appear to represent a certain point of view, and I accept that the hon. Member for Rutland and Stamford represents the small business men, with their attitudes to the Civil Service, to the Government and to the House, whose task is basically to protect and defend the community. However, I want to turn from that interesting speech to what seems to me to be the subject of tonight's debate. How often have speeches drifted from the subject of debate. We are concerned tonight with this last round of expenditure cuts, the reasons for the cuts and whether this round of cuts will make any profound difference, or whether we shall be back in the same situation in two or three months' time.
Do not let us forget that we went through this whole exercise in the spring. We have a massive review. We have

heard all this stuff about "the most searchnig" and "the deepest" review of public expenditure since the dawn of time. We produced an enormous Blue Book. We have been through all this exercise before. Why did we have to have another lot cobbled together, desperately running round the Departments picking up £1 million here and £1 million there? It happened because of the run on the pound, which took place in June when the Government teetered on the verge as the pound went down from $2 to $1·90, to $1·80, to $1·70 and then rose to $1·71.
Then there was this putting together of the package and the obtaining of the $5·3 billion standby credit, and things held. I do not think that many Members were deceived into thinking that the reason this package was cobbled together at breakneck speed and announced so quickly before the recess was the fear of the same thing happening again before the House reassembled in the autumn. It is in that light that we have to consider this package.
The reason why the debate and the discussion in the country have tended to go off at so many tangents has been that the Chancellor of the Exchequer, in defending these public expenditure cuts, has used a variety of arguments—at least three separate arguments. As soon as he got to grips with one, he shifted to another, and from that he shifted to a third. Tonight he is back again on to his first.
One is what I call the "make room" argument. It is the rather happy argument that he started off with three weeks ago—that we are headed for a boom and that, in order to make room for exports, we have to cut back on public expenditure. A different argument, advanced upstairs at a meeting but widely reported to the Press, was that we had to make the cuts because otherwise we could not finance next year's deficit. It was the financing of the public borrowing requirement that made the cuts necessary. That argument was quietly dropped when we were told that the cuts were necessary in order to maintain confidence in the pound.
We must ascertain the real reason and decide whether the policy will meet the situation. Let me deal with the "make room" argument. This argument was


never seriously advanced, although it crept back a little tonight. I refer to the argument that we have a scarcity of resources, so that if we are to have an export-led boom, we must cut back on public expenditure, as though economic forces would drive unemployed school teachers into becoming export sales managers, unbuilt roads would become extra motor car production, or unbuilt schools would lead to advance factories and a development of exports. I agree that in the long run we may need to re-expand our manufacturing industry at the expense of our service industries, but I doubt whether anyone thinks that it is necessary to do this in haste in July.
In more candid moments it was admitted by the Government that the "make room" argument would not apply until 1978–79. Only then would the British economy be sufficiently under pressure for it to be necessary to cut expenditure on the domestic front to make room for exports. That is a long-term argument. It did not require the kind of operation which has taken place in this country in the last six months.
I turn to the second policy argument—that it was necessary to have these cuts because otherwise a public sector borrowing requirement of $10 billion, $11 billion or $12 billion next year could not be financed. We all know the arithmetic which has been done on so many occasions. We were told that if employment went up, public expenditure would decline because we should need to spend less on unemployment relief and the requirement would decrease by $2 billion.
The argument is that if more money is required through Government borrowing, the rate of interest will have to be put up and we do not want the rate of interest to go up because that will strangle money going into industrial investment. We are left with the alternatives, either of printing money or increasing taxation to make up the difference. Therefore, the only way of financing the public sector borrowing requirement is to cut its total magnitude. That argument was powerfully advanced by my right hon. Friend in front of members of his party.
That is an important argument, but I do not think that anyone imagines that financing the public sector borrowing requirement in 1977–78, beginning in April, requires this sort of package. It

has been produced before the Summer Recess, but it could have waited until a Budget decision next April when it could have been done with much more care and precision.
In any event, the argument is not addressed to the niceties of financing the requirement. At this point it cuts into the third argument—namely, that our foreign creditors could do their sums and could well fear that there might be a resort to increasing the money supply and returning to inflationary pressures rather than adopting other methods of financing the public sector borrowing requirement. There is the fear that that will occur.
If that were the case, the whole discussion would spill into the third argument, which is one of confidence in our currency and in our economy. Whose confidence? At least three different groups are involved. There are the central bankers from whom the standby credit was obtained, which will have to be renewed in September. The second group is the IMF, whose agreement will have to be obtained if the standby credit is to be paid back or renewed. Thirdly, there are the holders of sterling.
We should remember that those are different groups. The IMF is the American and German Govenments. The sterling holders are a vastly different number of people. They include those who earn sterling in this country, British companies, and foreign companies. They include individuals of all sorts who make the choice of whether they hold their money in sterling or in foreign currencies.
It is my guess that the primary purpose of this public expenditure package was to fulfil a promise, or an indication, that was given to the central bankers by the Chancellor when he obtained the loan or standby credit. I imagine that he gave a promise or undertaking that he would make cuts of this sort. It may not have been an explicit promise; it may not have been anything like the 1969 letter of intent to the IFM; but can anyone imagine that this package was cobbled together to nudge slightly over the £1,000 million margin if there had not been some specific word of that kind? The object of the exercise is to build up the confidence of those who had to be involved in the standby credit arrangement. Surely it was done


in the knowledge that the IMF would have to sanction any renewal of the credit.
There is nothing wrong or dishonourable in that. That is how we shall have to survive. However, to please the people to whom I have referred does not necessarily mean that the great variety of sterling holders will have their confidence built up in the process. On watching the country in this week and after the House rises will they feel a vastly greater confidence in the future of sterling than they did a month ago? Are they likely to make a different judgment? I doubt whether that is likely.
From the history of sterling it is clear that in recent months and years we have had cough after cough and hurdle after hurdle. I can remember when we were told that without the first expenditure cuts we should not get the confidence of overseas holders of sterling. We were told that if we did not have a large public expenditure exercise, there would be no confidence. The exercise was held, but there was no great change.
Opposition Members may remember that we were then told that we should not regain public confidence in sterling unless the TUC accepted an incomes policy. We went through that trauma and we hurried up the progress. The trade unions were chased around and agreement was reached. We thought that everything was all right, but we were told that we must wait until the agreement was passed by the special meeting of the TUC as only then would confidence be restored. Then there was the run on the pound and we were told that this extra package was required.
Is the package likely to produce a change in attitudes? For the vast group of sterling holders—they are not only the gnomes of Zurich but British people who earn money abroad and who choose how to hold that money—this package will not represent a complete answer. Holders of sterling include authors, artists and others who earn royalties. Do they bank sterling abroad, or do they bring it back? Will their confidence in sterling be restored?
The fundamental problem—it is one that we are not facing adequately tonight—is that the confidence of sterling

holders abroad and our own confidence will not be restored until the British economy is more competitive, until it can deliver the goods when they are wanted and in the quality that they are wanted. We shall not get confidence in sterling if we drift from one crisis to another and if the Government's economic policy is not coherent and clear cut. It is when people abroad begin wailing in their own parliaments that they must have import controls to keep out British Leyland as it is flooding their countries with cars and they cannot hold them back that confidence in sterling will be restored. It will be restored when everyone who orders goods that are British will get them the moment that they are ordered, or when he wants them. There will be confidence when others say that they cannot stand or meet our competition.
The background is not only governmental; it is a combination of trade union activity, industrial leadership and Government policy. However, the Government must offer a coherent economic policy. That would do more for confidence in sterling than any public expenditure package that can be dreamed up and put before the people.
A public expenditure package was introduced last autumn, but within three weeks of its introduction it was decided to bail out Chrysler. A policy is put forward by the Government and no sooner is it presented than the Government issue a circular instructing local authorities to spend money on job creation. The local authorities are told that the money must be spent not only on important things that they have just cut. Nothing does more to demoralise than when we tell local authorities to cut building programmes, for example, which means a contraction of the construction industry, and then tell them in the next circular that there is a job creation programme which means that they must take on a certain number of jobs, although they should not build any schools or roads or encourage the building industry as something else is required.
That is a cosmetic operation. It is another twitch in policy which renders confidence in our economic policy weaker both internally and externally. This is the real reason for the lack of confidence in


sterling. So long as that continues, no amount of these cosmetic cuts will heal the breach. I am worried, as are some other hon. Members, that during the Summer Recess or in the autumn there will be another run on sterling.
If there is, what will happen? My knowledge of the Labour Party—I have known it all my adult life—tells me that, despite the views of my hon. Friend the Member for Tottenham (Mr. Atkinson), who wants to change matters only from within the trade union movement, we have come to the end of public expenditure cuts. I do not think that the Chancellor can do this exercise again.
There is a point at which those who have supported these measures—I am in agreement with the leader of the Scottish National Party, the hon. Member for Western Isles (Mr. Stewart), who cited the damage that has been done by cutting certain services— will come to the end of the line. What will the Chancellor do next? What will be the next cough in the downward slide of sterling?
I fear that the Chancellor will return with some of the policies advocated by my hon. Friends below the Gangway, either partially or fully adopted. I feel that he will return with a mixture of import controls as part of the policy. I agree that no other policy has been advanced, and that it is a policy spelt out clearly by the Cambridge Economic Group. I fear such a policy for several reasons. I shall outline them briefly, for Mr. Speaker has asked us to be short.
First, if import controls are to have a substantial effect on our balance of payments and allow this country to assert its independence from foreign bankers, as my hon. Friend the Member for Gateshead, West (Mr. Horam) has said, we cannot put heavy charges on imported food or on imported raw materials for manufacture. Therefore, we are limited to applying controls to a limited range of industrial goods that we import.
If we are limited in the application of import controls, it means that the controls that we can introduce will have to be Draconian. It is clear that they will have to be swingeing. The immediate effect would be to increase the prices of those products enormously. The second effect would be to encourage British industry to substitute for those imports and not to export. That is why the Cambridge

school pointed out with clarity that if exports are to be maintained at anything like the required level, import control policy requires either cuts in public expenditure or taxation increases totalling £3 billion. My hon. Friends below the Gangway must face the fact that their policy would involve a reduction of the standard of living of our people which would be quite as drastic as or more drastic than anything that the Chancellor has proposed—unhappy though I am about what he has done.
The major point is that we are a trading and commercial nation. If we cannot compete with the world and make our living at our present standard of living, we cannot maintain our standard of living by putting on import controls and retreating into a sheltered economy. We shall drop to a lower standard. There is no way out for a country which cannot sell its goods in the world market and earn its living at its current rate.
If in the autumn I have to choose between an attempt once again to put British economy policy on a coherent strategic basis, to get it competitive and effective and in a growth-oriented pattern and an import controls strategy of retreat, of acceptance of a second-rate level of economic activitity and a much lower standard of living, I shall not vote for that second policy. I shall not wait to put my case through the TUC: I shall not vote for it on the Floor of the House—and I hope that we do not have to face it.

8.11 p.m.

Mr. D. E. Thomas: I shall not follow the hon. Member for Berwick and East Lothian (Mr. Mackintosh), save to say how much I welcomed the forthright nature of his remarks. I only wish that the same kind of forthrightness could have been forthcoming in all our economic debates—particularly on public expenditure—from the Treasury Bench.
I endorse what the hon. Member said about the need for both short-term and medium-term economic planning. Those of us who are avid readers of Tribune—as no doubt many hon. Members on this side are—will have noted the interview in last Friday's issue in which the major matter exposed was the total failure of the Treasury civil servants to undertake


any medium-term economic planning whatsover.
However much we may differ as to the nature of that planning, as to the mix between private and public investment, private initiative and public control, within that planning, we must certainly all be agreed upon the need for rational economic planning. This hits us particularly in the case of development areas such as Wales, the North of England and Scotland.
I have been concerned in the Chancellor's rushed package about the effects of the proposals for REP equalisation, for example, on the Welsh economy. I welcome REP equalisation in principle in terms of restoring equality between male and female labour, but when there is a low female activity rate because of the failure of successive Governments to provide the potential female labour reserve in Wales, for example, with the jobs that women would like to take up, the REP equalisation will result in a net reduction of regional policy resources within the Welsh economy rather than a maintenance of those existing resources.
I am also concerned about the impact of the payroll tax in creating further unemployment, when Wales already has an intolerably high level of 8 per cent. unemployment.

Mr. Horam: Does not the hon. Gentleman agree that a switch from indiscriminate subsidies like REP towards more selective help could help his region and regions like mine, the North-East, just as much as we should with a higher rate of REP?

Mr. Thomas: I am grateful for that intervention, because that is precisely the point I intend to develop—that although we have had an indication of where the switch is to be made, or at least where the initial switch is to be started, we have not had a clear indication of precisely where that switch is going and how much the total switch entails. What I am asking for is an indication of how much is going in addition to the Welsh and Scottish Development Agencies to provide selective assistance for development.

Mr. David Mitchell: Would not the hon. Gentleman accept that selective

assistance can never help the large mass of small firms in the way that is necessary if they are to survive and prosper?

Mr. Thomas: We need both the broad range of incentives which are available and also selective assistance, particularly in the form of equity participation for larger projects in development areas. We need to know whether resources are being transferred in regional policy from REP, which is in effect a regional devaluation, into more selective financial assistance. We need to know how much is being channelled and for what specific purposes it will be used.
One other aspect which has not been stressed so far in debate which has tended to centre naturally on the issue of wage inflation and its relationship with public expenditure as a policy to contain wage inflation is a real discussion of the impact of these cuts on the social wage. The Chancellor has always avoided discussing these issues in detail. His right hon. Friend the former Secretary of State for Social Services, the Member for Blackburn (Mrs. Castle), talking about the social wage last year, said that the most important part of the standard of living of most people depended on the great complex of services we call public expenditure. She said that they were not only the key to the quality of life but the key to equality. She said that the great advances had come from better education, health services, housing, care of the old, the disabled and the handicapped.
As we know, the social wage as a percentage of total public expenditure is now up to 60 per cent. In one of his Budget speeches, the Chancellor said that the social wage had been increasing much faster than ordinary wages and prices, but what he failed to take into account was the fact that the social wage is paid mainly for the benefit of the greater part of the population which does not receive a working wage or a salary. Wage earners are already outnumbered by the totals of dependent children, the elderly, the sick, mothers rearing children, the later school leavers, the unemployed and so on.
We must have from the Treasury Bench tonight an analysis not only of the potential effect on international creditors—on the IMF—but of its effect in terms of the level of the social wage on


families. We have already seen, in the Government's failure to implement their programme of social policy—particularly their income maintenance programme—that we are facing a real reduction not only in take-home pay but in the relative position of the social wage and the overall services provided through out public expenditure.
My specific concern, naturally, is with the £12 million reduction in the budget of the Secretary of State for Wales—a reduction in money spent on roads, on the health and social services, on education and on local authority services. I am concerned about the effect of these cuts not only on the statutory services themselves but on the back-up services and the replacement services which so often have to be provided by voluntary bodies.
Any further cuts in statutory social services, any erosion in the social wage through the statutory provision, places additional huge financial burdens on organisations whose voluntary work props up the inadequacy of Government policies. Whenever there are public expenditure cuts by statutory authorities, both central and local government, an additional burden is placed on the resources of voluntary bodies.
I am particularly concerned here with those voluntary bodies involved with one-parent families, with the homeless and with housing needs—I am thinking particularly of groups that I know well in Cardiff—which operate replacement services for those which are not provided by the local authority, and which will have to face an additional 2 per cent. on the payroll of all their staff. This is added to the cuts in expenditure on social policy and will provide an additional burden on the voluntary sector. The Government should consider whether it is not appropriate to have a policy of exemption, or perhaps a lower level of any payroll taxation that they impose on those persons who are employed by voluntary organisations which are making up for the deficiency of the statutory provision of the Government themselves.
I shall concentrate the time left to me on an area of expenditure which is causing severe problems in Wales—housing. About 48 per cent., or nearly half, of our houses are pre-1918 as compared with just

over 30 per cent. in England. Not only is the housing older in Wales but it follows that the condition of our housing is far worse.
Surveys conducted in 1968 and 1973 indicate that one house in six is unfit. The number of unfit dwellings in Wales increased from 92,000 in 1968 to 147,500 in 1973. Of the unfit dwellings 65,000 were in the central and eastern valleys of Wales and 33,000 in the remainder of industrial South Wales.
We face a major housing crisis, yet, the reaction of the Welsh Office is to reduce public expenditure on housing in real terms. For 10 years we have declared that there should be a planned programme for housing to deal with the housing crisis. The view of the Plaid Cymru research group is that over 25,000 houses a year should be cleared or improved to deal with that crisis. That is the need if we are to overcome the problem. It represents a target of nine per 1,000 population. The present level of achievement is six per 1,000 population, which compares badly with other countries. Our record is far below that of Switzerland, Japan, Finland, Australia, Holland, Iceland, Sweden, Spain, France, Norway, Germany, Denmark, Canada, Greece, and even Ireland.
The reaction of successive Governments—and here the Conservative Government have much to answer for—has been to fail to face the mounting housing crisis which becomes worse each year. Because of the age and poor conditions of housing in Wales, the number of unfit dwellings can be expected to increase at a rate of about 10,000 a year for the next 20 years. That means that at least 16,000 houses need to be improved or replaced each year. Not only do we need a programme of massive rebuilding but one of improvement. It is in that context that we look at the cuts.
According to the White Paper housing is to receive £20 million less in real terms in 1979–80 than in 1975–76. But last year the Secretary of State for Wales boasted of a 20 per cent. increase in spending on housing in Wales. That was a freak and we shall not see that level of house building maintained. The 17,000 houses that were built last year will fall far below the level of the Conservative Government's achievement in the early 1970s.
The Secretary of State said of housing in Wales in an oral answer on 26th July that he had been able to obtain an additional £20 million to £30 million for house building in Wales out of the Contingency Fund. That figure represents only a partial restoration of the cuts introduced by the earlier White Paper. In real terms the Government are far short of a realistic target if we are to bring the housing stock of Wales up to the British average, which is no marvellous objective. We need an additional £80 million a year and not just the £20 million. which is merely a partial restoration of an earlier cut.
We should not only look at the need for an increased public sector house building programme but at improving the rôle of local authorities in providing loans. I criticise the Government for the way in which they have passed the buck to building societies in that respect. Local authorities are of particular importance in Wales where a high proportion of houses are old and where people are relatively lower paid. The level of personal wealth per capita in Wales is only 72 per cent. of that of the United Kingdom and there is therefore a particular need for local authority loans.
Building societies in Wales and the rest of the United Kingdom have failed to provide the borrowing that is required. The importance of local authority funds to potential house buyers in Wales is shown by the fact that in 1974, when there were no ceilings, just over 5,000 advances were made by local authorities in Wales compared with about 23,000 by building societies. It is therefore clear that local authority advances play a vital part in housing policy.
I am anxious lest the decisions to cut back on local authority lending pre-empt what is supposed to be an inter-departmental review of housing finance. In that respect the one hand does not know what the other is doing. The Treasury cuts back on local authority lending at the same time as another Department looks at housing finance. That is intolerable.
I seek an assurance that any decisions on reductions in local authority mortgages will not pre-empt the housing review, which I hope will start to switch resources from the upper end of the market to

where they are needed—for the improvement of housing stock in areas such as Wales. I stress that if the Government are not prepared to restore the level of housing expenditure in Wales and are not prepared to restore local authority loans, they will be resisted from all sides.
After our debate on the Aircraft and Shipbuilding Industries Bill, no debate would be complete without a question from the South Wales Echo. In its edition of 28th July we read that the leader of Labour group on Merthyr Borough Council, the Rev. Bill Morgan, said:
Housing is not an area where cuts should be made—what about defence?
Labour councillors have attacked the circular from the Welsh Office. Labour councillors on other authorities in Wales, such as the Cynon Valley Borough Council and the Rhymney Valley, support the lead taken by Plaid Cymru councillors in resisting the cuts, and particularly what is described as "Government by telephone". Late on Friday afternoons the Welsh Office rings up chief executives and says "Stop your council house building programme for anything which has not been finally approved." That kind of government by telephone call and circular, that restriction on local authorities' freedom of action to decide their own priorities in their own areas, is being resisted by Labour councillors.
This final round of cuts—in my view it must be the final round—is the end of the road for Labourism in Wales. The cuts will not be tolerated by the Labour movement in South Wales. In the late 1960s it was conned into tolerating Wilsonism, into tolerating the cuts in public expenditure made then and the policies of unemployment of that Labour Government. The Labour and trade union movement in South Wales will not tolerate the present round and the implementation by a Labour Government of Tory policies.
The people of Wales will increasingly turn to the only radical alternative on the Left in Wales. We shall see my party in control not only of Merthyr District Council and the Rhymney Valley District Council but of Mid-Glamorgan County Council next May.

8.30 p.m.

Mr. Frank Allaun: I wish to speak in support of the amendment tabled by 71 Labour Members. If


I were a clergyman, which manifestly I am not, I should choose as my text for tonight "The Government should cut the dole queues, not social expenditure". This happens to be the slogan of the AUEW technicians' section but is none the worse for that.
Recently a North-West bus engine maintenance factory advertised three vacancies for apprentices. Four hundred unemployed boys queued up for those three vacancies. I know one young man who has never had a job and who spends his days writing letters in reply to advertisements, letters to which he never receives an answer. What a discouraging, heartbreaking, way to start industrial life!
The tragic figure of 209,000 unemployed school leavers will go up with a jerk in the next few days. For the current figure, whilst including Scottish school leavers who broke up a month ago, excludes those in England and Wales who have left school since.
The total out of work is already 1·45 million, plus those who, although out of work, have not registered. At such a time, for the Government to embark on measures which are bound to increase those numbers still further is unforgivable. The number of additional jobs lost will not be 70,000, as estimated by my right hon. Friend the Chancellor of the Exchequer, but at least 160,000, as stated last week by the Treasury's Deputy Chief Economic Adviser, Mr. Posner.
We on the Left have always said that if unemployment should reach a total of 1 million, racialism would spread. Now that has come about. It is so easy for the Fascists to blame coloured men and women, using them as a scapegoat for the justifiable anger with a society which has put 1 million out of work. That was Hitler's tactic. To defeat it we must defeat unemployment.
If the unemployment total rises to 2 million, which is not impossible—it is moving in that direction—we shall hear voices saying that we cannot afford this deficit in public spending and we must cut the dole. Shades of 1931, which I remember very well.
My right hon. Friend the Chancellor has given in to the combined pressure of the bankers at home and abroad, the

IMF, the City, the CBI, the Press Lords, the Tory Party leaders and some top officials inside the Treasury. It is their policy which is being implemented. Some of us warned of this danger 18 months ago. Against that we shall have to mobilise the counter-pressure of the Labour and trade union movement. If we do not win, reaction, having tasted blood, will soon be back again, demanding a further series of cuts.
The Cabinet threatened us two months ago with a cut of £1,000 million in public spending, but on top of that they have imposed a 2 per cent. increase in employers' national insurance contributions. That will, of course, be passed on to the consumer. Therefore, not £1,000 million but £2,000 million is being taken out of purchasing power. To do this when there is already massive unemployment is so deflationary as to create inevitably still more unemployment. One might think that the Cabinet's message to the nation is "Keynes is dead. Come home, Sir Keith, all is forgiven."
The Chancellor has argued that he must cut the public sector to release resources for the export industry, Unfortunately, with 1,500,000 unemployed and firms working at only partial capacity, there are more than enough resources to cover both spheres.
It may be asked "What do you consider to be full employment?" I would reply—I do not think everybody would agree with me but this is my strong view—that full employment means not more than 260,000 unemployed, the number recorded in 1966. Therefore, there are 1,250,000 workers—a mighty number—who require to be absorbed.
Consider how this policy will affect the housing shortage, which is causing a mass of human misery—and, as I wish to make clear to the hon. Member for Merioneth (Mr. Thomas), not only in Wales.
The Chancellor announced last month a cut-back of £150 million, but that is in addition to a cut of £284 million in projected expenditure announced in the White Paper in February. Together this constitutes an extremely heavy double blow.
We have been told by the Chancellor that his cuts will not apply until next year. I regret to say that this is not the case in regard to housing. A complete three-week freeze on all local authorities is now in


force. Some say that it will last three months, but whether or not that is the case, immediately that freeze ends there will be drastic cuts imposed on house-building programmes in many, if not most, local authorities.
This is occurring because it is argued that local authorities are building more than was planned for this year. But up to now they have been free, and indeed were encouraged, to build as many new homes as they could. Now the brake is on. Every new house built will have to have Government sanction. Outside the stress areas the numbers sanctioned will be reduced or even ended.
I hope that my right hon. Friend the Chief Secretary in replying to the debate will answer the question—what reduction in the number of public sector starts is envisaged and will be required in this financial year, let alone the year 1977–78? Although I represent a stress area in the Greater Manchester conurbation, I do not forget that even in towns such as Bournemouth council houses are essential. A bus driver in Bournemouth, if his family is to find a home, is as dependent on a council house as is a bus driver in Salford. It is criminal folly to cut housing. There are so many building workers out of a job.
If we include those in the related trades, such as bricks, timber and glass, unemployment in the construction industry now totals not 200,000 but 260,000, as official Ministry figures will confirm. It costs more to keep these people out of work than to keep them fully employed, building what our people need. Consider an average family of father, mother and two children, with the breadwinner earning £60 a week. If he loses his job it costs £61 a week to keep him and his family in unemployment and other benefits and in loss of tax which would otherwise have gone to the Chancellor. How stupid can we get?
There is a second housing cut of £146 million in the amounts local authorities can lend to those who cannot get mortgages from building societies, because they wish to buy older type houses, because they are on low incomes or because they cannot raise the deposit. It must be remembered that many local authorities give 100 per cent. mortgages. We have been told by the building socie-

ties and by the Government with infuriating complacency that the societies will make good this deficiency. They promised last year to make good the earlier £100 million cut by the Government. The Government entered into an arrangement with them with the best intentions. Yet 12 months later the societies report that only one-third of this sum—£34 million—had been made available.
Many cities found that only a fraction of the applications they had sponsored had been granted. In Salford, it was 11 out of 88. And probably these were people who would have got mortgages from the building societies in any case. I propose to give new evidence of red lining—that is, the process of starving the old inner-city areas of mortgages by the building societies, in an Adjournment debate tomorrow night. I warn the Government that the same thing will happen again unless they require the societies to make 10 per cent. of their total advances, now running at a rate of £6 billion a year, available to local authorities for the purpose of helping the poorer half of the community to buy a home.
I conclude by saying this to the Government: it is easy to cause unemployment but it is not so easy to stop it. Therefore they must cancel the cuts before irreparable damage is done.

8.44 p.m.

Mr. Wyn Roberts: There is deepening concern about our future in all parts of the country. Nowhere is this concern more acute than in the assisted areas where unemployment is heaviest. Wales is no exception. We have 81,000 unemployed, representing 8 per cent. of the working population. This is in midsummer. What will the position be like next winter? It is bound to be grave.
When I look further ahead, to next year, I can see little consolation. The rapid expansion in the United States since mid-1975 seems to be waning. If its recovery peters out, the prospect of a significant upturn in the British economy is bleak. I do not share the Chancellor's optimism. He seems to be gambling on an upturn which may never happen. That is the realistic background against which I view the Government's measures.
The Chancellor of the Exchequer would have us believe that his measures


were designed primarily for industrial recovery next year. Since his announcement, the whole country has learned that his package had very little to do with industrial regeneration, and that has been pointed out by Government supporters this evening. The package was virtually forced upon him by our foreign creditors and the fact that the Government must seek further credit before the end of the year.
The Chancellor of the Exchequer apparently is unwilling to say how much of the $5,000 million standby credit arrangement has been consumed. I can well understand his reluctance to answer that question in view of the rumours currently circulating about the proportion of that standby credit which has been used up even in two months and with four months still to go.
There was a lack of candour in the right hon. Gentleman's statement which seems to characterise the whole Government. When I questioned the Secretary of State for Wales on Monday of last week about the effect of the public expenditure cuts on Wales, he said that they would amount to about £12 million, and he went on:
On the other hand, an extra £20 million has been made available for housing in Wales and in addition extra resources will be made available to the Welsh Development Agency. There is no reason to believe that employment in Wales will be more adversely affected by these changes than elsewhere in the United Kingdom."—[Official Report, 26th July 1976; Vol. 916, c. 14.]
I do not think that that is a frank and complete answer. Anyone would think that we were to gain by the right hon. Gentleman's changes, but everyone knows that that cannot be true.
The combination of reduced REP, delay in the payment of investment grants, a more selective approach to assistance, the cutback in investment by nationalised industries on which we are heavily dependent for employment in Wales, coupled with the increase in employers' insurance contributions will have a very serious adverse effect on the Welsh economy.
I am not attacking the Government's policy of cutting public expenditure, although I believe that many of their cuts are misplaced. My right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) was right when he intervened

earlier to point out that under this Government public expenditure had doubled and so had unemployment. The Government have taken the first gingerly step in the right direction. I am attacking their lack of candour. I am criticising them for not being more honest with us and with the people and telling the truth about our present desperate situation, rather than trying to bluff their way out and blinding people with false optimism.
We in Wales know, as well as Mr. Posner who appeared before the Committee on Public Expenditure, that the Government's estimate of 60,000 more unemployed in the United Kingdom as a result of these measures is very conservative and that the real increase may be anything up to three times as many. We know, too, that the brunt of the increase will have to be borne by areas such as ours. They will be the worst hit.
What does the Secretary of State for Wales propose to do about it? He will secure additional resources, undefined as yet, for the Welsh Development Agency which is not yet equipped to do anything except carry on the work of the Derelict Land Unit and other bodies that it has taken over as going concerns. I warned the Secretary of State at the inception of the agency that he was wrong to expect it to be our salvation in Wales and to have a significant effect on unemployment.
The first essential is to encourage industrialists and business men to have the will to invest. Apart from lack of resources, the will to invest is not present in industry and business today. It may be, as some of my hon. Friends have pointed out, that high interest rates are sapping the will to invest.
The Government, in their dealings with the CBI, have failed miserably to provide such encouragement to industrialists. Now they positively discourage investment by increasing the employer's insurance contribution. It is a tax on employment and, coming after the Employment Protection Act—another serious deterrent to employment—it is bound to cause layoffs and redundancies.
We are all agreed that investment is essential, but it is difficult because the Government, as the Prime Minister


pointed out, are pre-empting a large proportion of the national resources. That proportion must be reduced probably more than the Government have reduced it now.
Investment is best made by those who make the profits and enable investment to take place. What evidence have the Government that they can do it better? All the evidence surely points the other way. Yet the Labour Party clings to its ideas about nationalisation and intervention with nothing short of crazy persistence. The Government are changing the mix in the mixed economy, as has been pointed out, in favour of the less profitable nationalised elements in it. They seem to feed the gander and starve the goose which lays the golden eggs, and then complain when the goose is too under-nourished to lay.
My right hon. Friend the Member for Taunton (Mr. du Cann) was right to say that when public expenditure increases beyond 60 per cent. of GDP we have reached the limit and just cannot go on. Yet there is no sign of any abatement or change of heart on the part of the Government and the Labour Party.
Wrong-headed, spendthrift Government policies lie at the root of our troubles and the economy will continue to deteriorate while these policies are pursued. The Government must begin by being more honest with themselves and with the Labour Party and then perhaps they will be more honest with us and with the public at large. Alas we are faced with the bluff of a blustering Chancellor, which impresses no one but himself.

8.53 p.m.

Mr. Julius Silverman: In the short time at my disposal I should like to make a few comments which I hope will help to bring the subject of public expenditure into better perspective.
First, among Western European developed nations we are comparatively low in the public expenditure league. When we talk about the strength of government and so on, we should bear that in mind. The difficulty is that at present we do not have the resources to pay for that public expenditure.
Secondly, when we talk about public borrowing requirements we should always

remember in the days when it is assumed that Keynes is dead and gone that if it were not for public borrowing and deficits over the last 30 post-war years, the whole of the Western world would have faced an enormous unemployment crisis. Therefore, public borrowing and deficits have become an essential part of our economic make-up. It is the system that demands it. Otherwise, the system is self-defeating.
The third point about unemployment is this. The hon. Member for Conway (Mr. Roberts) and, indeed, the right hon. Member for Leeds, North-East (Sir K. Joseph) have said that under the present Government public expenditure has doubled and that employment has also doubled. However, it is really the other way around, because nearly half of our public expenditure borrowing requirement is due to unemployment pay, as my hon. Friend the Member for Salford, East (Mr. Allaun) said, and to loss of income tax and the increase in various other items of social benefits that are necessary. I think that a calculation appeared in The Times recently that nearly half of the present rate of public expenditure was due to unemployment. That must be borne in mind.
Therefore, one ought to inquire—and not sufficient time has been given to this—why this unemployment exists. It is due partly to the great world recession, which has affected us as well as other countries. We, however, are in a situation that is worse than that of other countries, because for this country it has been traditional that we export our industrial goods and import our raw materials. We are an exporter of industrial goods. We use those goods to finance our purchases of raw materials. For this country that has always been assumed to be one of the facts of life.
The pattern has now changed dramatically. I notice that in the first half of the current year alone, we have been importing manufactured goods at the rate of £16,000 million a year. We cannot do it. Well over 75 per cent. of the value of what we export in manufactured goods we import in manufactured goods. In relation to the EEC, for instance, we have a net deficiency in our balance of trade in manufactured goods of well over £1,000 million. In regard


to West Germany alone the rate of deficiency is £900 million a year.
We then go to these other countries, including West Germany, and say "Will you please lend us the money in order that we can continue this crazy arrangement of spending our resources on importing manufactured goods that we ought to be producing ourselves?" That is the present ridiculous situation. The same applies to Japan and other countries. This results in not only our balance of payments deficit but the enormous unemployment, which is the most important and significant part of our public borrowing requirement at present.
I should have thought that the major defect in the strategy outlined by the Chancellor today was the complete absence of any discussion of the essential point in our industrial position—what we are doing about import substitution. What planning can be done with industry and the unions to effect this substitution, whether by import controls or any other arrangement? That is the major problem of the Government's strategy. That is the point that one has to bear in mind.
I would refer to one particular aspect of the cuts before drawing my remarks to a close—it has already been mentioned, but it is worth while mentioning again—the disappearance of £146 million from local government borrowing for mortgages. This will create a serious housing deficiency because local authorities cater for a certain sector of housing —the older houses and houses in the less desirable districts—which, so far, the building societies have either been unable or unwilling to tackle. I am told that one can enter into agreements with building societies about this but that the building societies cannot transmit the matter to branch level because branch level will refuse to give mortgages in those districts or for those particular houses.
I should have thought that the sensible proposal would be to tell the building societies "Lend your money, or part of it—say, £150,000 or £200,000—to the local authorities and they will do the sorting out. They will see that your security is maintained and that you get your interest. They will ensure, for they have the experience to do so, that this

section of the housing market is adequately catered for."
One or two points in the cuts, apart from the broad strategy, call for reexamination by the Government, and I hope that they will be considered.

9.2 p.m.

Mr. Nick Budgen: In the very few moments which may be left to me—I am not sure how many—I would like to deal with the points raised by the hon. Member for Salford, East (Mr. Allaun) about housing expenditure.
The hon. Gentleman spoke as one who represents an area of high housing stress and an area which has been affected by the many mistakes of many Governments in spending so much, and devoting so many resources, to housing which has unhappily resulted in a dreadful sense of failure and despair. I would suggest that the price which the hon. Member for Salford, East will have to pay, if he is to see a continuing high level of council house building, is a very substantial increase in the rents paid by the tenants of council houses. That is the bullet upon which the Government will have to bite and they will have to do so fairly soon.
The declining proportion of the rents which go towards the cost of providing council houses is quite ridiculous. From page 68 of Cmnd. 6393 it is plain that the amount by which rents cover the cost of housing has declined from 82 per cent. in the early years of the decade to 43 per cent. this year. It is plain that the two main factors have exercised the Government's mind since they came to power. During the first period of power they could not raise council house rents because it was necessary to bribe the electorate in order to win the second election. During the period after that rents could not be raised by more than 60p a week because that was the indispensable condition to a form of wage control. It was part of the social contract and part of the price that this Government, indeed any Government, have to pay if they are to have any form of statutory control of wages. The result has been a doubling, no less, in the amount of central Government subsidy paid to council house tenants.
This cannot go on, for the price which is being paid in Salford, in Wolverhampton and elsewhere is that council houses are now not being made available to those who ought to have them, to those who are in need, to exactly the people who ought to be in council houses. The subsidy is going to the rich, to those bringing into their homes £100 a week or perhaps even more than that. The subsidy is indiscriminate.
It is no good the hon. Member for Salford, East and others like him wringing their hands and saying how dreadful it is that the housing budget has been slashed, how dreadful it is that the building societies do not act as though they were arms of the State, as though we had already nationalised the building societies. It is dreadful, says the hon. Gentleman, that the building societies do not lend in the way the Government direct.
The price which must be paid, and paid soon, is that council house rents will have to rise. I know that many hon. Members on the Government side recognise that, but they then say that it is not possible to free a market once it has been rigged. There are political difficulties. They will argue that the Tories introduced the Housing Finance Act, and did so in a doctrinaire and aggressive manner, with the consequence that it is no longer politically possible to raise rents.
There may be an argument there, but I remind hon. Members of one fact. The previous Government rigged the market in the price of the goods and services provided by many nationalised industries, but those prices have been raised. A number of nationalised industries are now beginning to show a profit—not a large profit, but at least a profit—and what that demonstrates is that, in spite of the need to bribe the electorate, in spite of the need to try to explain necessities of wage control, it is still possible for the State to allow some prices to rise.
In these circumstances, my advice to the Government is this. They have done quite well in that respect. Let them be reassured, let them be brave, let them recognise that it may still be possible to allow council house rents to rise. If they do allow them to rise, more money will

be available for those who need council houses, for those in real need—not for the rich, not for those who happened to get a council house through historical accident 20 years ago. Housing will be available for those who need it, for those towards whom we ought to feel a sense of compassion, those for whom a caring society ought to feel real concern.
We are not interested in hereditary tenants. We are not interested in those who, perhaps 20 years ago, were in need. We are interested in those who are in need today, and we ought to make resources available, even if it be at the cost of offending those who for many years have had very cheap housing.

9.3 p.m.

Mr. Michael Heseltine: The debate has ranged widely, as the House must have expected, and the many-sidedness of the various approaches to its subject matter has shown up the inevitable problems facing the Chancellor in reaching the conclusions which he put to us. I think that the House would, however, have felt that the right hon. Gentleman was being fairer with it if he had been less prepared to put figures before us which do not stand up to investigation.
First, I believe that the Chancellor did not present either to his own supporters or to the House the full international comparison on unemployment within which context the Government's record must now be judged. It has been one of the Chancellor's oft-repeated statements that unemployment may be bad here but, of course, it is a great deal worse elsewhere, or at least no better. The reality, on the other hand, is that the internationally adjusted comparisons show that the United Kingdom now has a higher rate of unemployment than that in most of our main competitor countries. The figures are dramatically worse in this country.
When the Chancellor says that he is now introducing measures, albeit belatedly, that are intended to reduce public expenditure and that he is anxious about the effects of unemployment, it must be realised that he is doing some two years late what other countries already have done. They took on the burden of doing so and told their people the truth and have now seen the worst of


unemployment put behind them, whereas in this country we have the worst of unemployment yet to come. The second inaccuracy in what the Chancellor said today—

Mr. Litterick: We understand the point, but we should like to hear the factual basis for it.

Mr. Heseltine: I will willingly give the factual basis. The unemployment percentage in the first quarter of 1976, seasonally adjusted, for the United Kingdom is 6·2. For Italy it is 3·6, for France 4·8, Germany 4 and Sweden 1·6. Those are the adjusted internationally comparable figures. I realise that it makes the case harder for Labour Members who are trying to suggest that things are not as bad in this country as people know them to be. Those are the internationally comparative figures and if the Chief Secretary would like to produce other figures on a genuinely internationally comparable basis we should be very interested in them.
My hon. Friend the Member for Horn-castle (Mr. Tapsell) intervened in the Chancellor's speech to make the point that the money supply increases under the Government of my right hon. Friend the Member for Sidcup (Mr. Heath) were rising at a time when production was rising in 1973. The Chancellor replied that production was not rising in 1973—I think the words he used were that the economy had seized up. If we look at the statistics for production output and cost we find that in 1973 production for all industries rose by 8 points over 1972. The Chief Secretary shakes his head. I would be happy to pass him the Monthly Digest of Statistics and he can then quote alternative figures. If he is talking not on an all-industry basis but on a manufacturing industry basis the same applies. In 1972 the figure was 102·4 and in 1973 it had risen to 110·8. The only figures that the Chancellor might have had in mind when he talked about the economy seizing up came later. Having peaked in 1973, industrial production was down to 106 in 1974 and to 101 in 1975. There has been no sign of an improvement. Any seizing up of the economy that has taken place has followed the election of the Labour Party and particularly the activities of the Chancellor of the Exchequer.
The general approach on this crisis round of the Chancellor of the Exchequer is that he has worked out a very careful strategy which he has brought to Parliament to readjust by a certain amount of fine tuning the economic management of the economy in order to keep us on a safe and steady course. In other words, the whole activity is carefully conceived and planned to provide the right background against which the public sector borrowing requirement might be used in an orderly way to release resources for the private sector.
One gets the impression that the Chancellor genuinely believes in the sense of order and purpose with which he puts the scene before us. The reality is totally different. The reason, as my hon. Friends have pointed out consistently, as have hon. Members opposite, is not that the Chancellor had planned to come to the House and to cut public expenditure. The reason that he has come to the House is that, having negotiated the $5·3 billion stand-by which expires on 9th December, he must either renegotiate the stand-by or find another method of replacing the funds. To do that, he must go to the creditors and offer them a new economic strategy for this country.
That is the time imperative which hangs over the right hon. Gentleman's head. The idea that there is any sense of order about it is completely to misrepresent the situation. He has no choice but to put forward a new economic strategy and that is the reason for the series of much discussed and much leaked Cabinet interviews in the last few weeks from which anyone who is interested enough to watch what goes on knows broadly the nature of the proposals and of the decisions. We know broadly which proposals the Cabinet supported and which it rejected.
But the proprosals which the Chancellor originally presented to the Cabinet were not those which emerged. They were not even the proposals in total sum. Originally the Cabinet discussed reductions in public expenditure of about £1 billion in the following financial year. By the time the discussions were over it had been made clear to the Chancellor and to other members of the Cabinet that that level of public expenditure reduction would not be sufficient. That


was why towards the end of the discussions an extra £1 billion had to be found quickly and in a wholly random way, without going back over any of the previous deals which had been done by spending Departments and members of the trade unions fortunate enough to be consulted.
Therefore, a rapid deal was done in the closing days of the time available before the House rose for the Summer Recess and the Chancellor produced his public expenditure cuts. We all know that in facing the Cabinet and the House the right hon. Gentleman had an impossible task from the start. He wanted to persuade our creditors that we would bring a degree of economic control to the management of our affairs. At the same time he wanted to persuade the Left wing that no essential ideology would be challenged. He wanted to persuade industry that the Government were genuinely interested in backing success and increasing profits. He wanted to persuade the trade unions that he was in no way going back on the tax reduction deals made at the time of the last Budget.
All those things are totally incompatible. There was no way in reality by which the arguments could stand up and remain all on one side. That is why hon. Members below the Gangway opposite have gone to extraordinary lengths to get a debate on this issue. It is the first time that I can remember—indeed I understand that it is the first time that it has happened—that the House has been presented with a budgetary adjustment of £1·8 billion without the Government making any attempt to debate the issue in the House. We are having a debate only because the Opposition found time for it in their Supply allocation. Hon. Members below the Gangway should be complaining not because their motion has not been called but because the Government tried, by every devious means at their command, to deny them the debate that is their full and legitimate entitlement.
When the Chancellor of the Exchequer made his statement today there was an interesting intervention by the hon. Member for Penistone (Mr. Mendelson), who raised the question of the growth projections on which the strategy was based.

The interesting point about the Chancellor's latest posture is that, despite the cuts and the hardship that they will cause, the bulk of independent observers do not believe that they will be the last. They do not believe that he has got his strategy in line with what is likely to happen in the next two or three years.
The hon. Member for Penistone said "Let us suppose that unemployment gets worse. Let us suppose that it is not contained within the 60,000, 100,000 or 150,000 predicted, depending on which expert one listens to. Will you turn up the steam so that we can get reflation going earlier? "The Chancellor replied that there was no question of that—that if he got it wrong this time, the cuts in living standards that he would have to impose would be of a magnitude little dreamt of by his hon. Friends but talked about consistently by my hon. Friends ever since the Chancellor introduced his first highly inflationary Budget in 1974.
The Chancellor is taking the risk that he can maintain a growth rate of 4½ per cent. in the domestic economy. In his view, that will sustain the level of the public sector borrowing requirement which is still built into his calculations.
Have hon. Members opposite stopped to think what prospects there are and what expert outside evidence there is for thinking that the 4½ per cent. growth rate will be achieved? What is the summary of outside statistical evidence? The OECD, the London Business School, Phillips and Drew and the National Institute do not agree with the Chancellor. The only summary published since the right hon. Gentleman's last statement shows a figure that is only half the growth rate of GDP upon which the Chancellor has pitched his whole strategy.
As always, the Chancellor is taking a last extreme risk with the British domestic economy. Doubtless he will be back to explain how the next adjustment is part of an overall strategy—unless his hon. Friend the Member for Berwick and East Lothian (Mr. Mackintosh) is right and there is no coming back because the tensions in the Labour Party are now so great that any further downward adjustment of public expenditure or the borrowing requirement will persuade them to face what they have never faced before —that half the party has nothing in common with those on the Front Bench


except the platform they share at election time.
The issue that has been most frequently discussed in the debate is the attitude of British industry and whether it can reasonably be expected to play a greater part in Britain's recovery. Let us start from a basic principle which will not be challenged, even by hon. Members opposite. The purpose of being involved in free enterprise activities is to seek profit. Hon. Members opposite may not like it, they may regret it or regard it as immoral, obscene or a massive misuse of national resources, but as long as there is the opportunity of profit, that is the free enterprise system and it is necessary to understand that basic fact. As long as there is the prospect of profit, it is reasonable to assume that the free enterprise system will invest, provided that it can see markets in which it can sell at prices which earn adequate returns on capital.
This is a harsh lesson to which the Treasury Benches have come to pay lip service time and again. It is intriguing to listen to abandoned Ministers coming to the Dispatch Box and using words in support of the free enterprise system and seeing the solemn faces on the Back Benches. Then late at night, in a momentary lapse, an escaped member of the Tribune Group, who has somehow found his way into Government, comes to the Box and lets fly at profit and his hon. Friends metaphorically cheer themselves red because someone is satisfying their wilder instincts.

Mr. Sedgemore: Give him some bromide.

Mr. Heseltine: I know that hon. Members opposite do not like it, but they will just have to sit there and take it for another 10 minutes. Any physical activity of mine is as nothing to the singing that we expect from them at the end of the debate.
Given that the private sector will pursue profit if it has the opportunity, is it in a position to see that prospect and, if so, to pursue it with the resources over which it has control? As part of the package introduced at one minute to the hour—just as the Cabinet was about to agree the rest of the items— the Chancellor has taken £1,000 million in a full

year out of the free enterprise economy. In other words, he has reduced its ability to invest, to respond to any market opportunities that exist. His argument is that it does not matter so much because it will all be passed on in higher prices to the consumer.
This is the Chancellor whose profound understanding of the capitalist system is such that when he first came to power in the Budget which started the reverse trend—that of hostility towards the capitalist system—he said
I see no reason why the mass of British business should find itself short of money for investment in the coming year.
That was his statement in the Budget Speech of 1974.
Anyone who thinks that it was the Government of my right hon. Friends that acted in a way inimical to the free enterprise system should remember the Chancellor's other comment in that speech:
Business is in a uniquely favourable position today."—[Official Report, 1st April 1974; Vol. 871, c. 1007–08.]
Since that time, as a result of the activities of the Labour Government—in the social contract wage explosion, in increased taxes, and in the tightening of the Price Code—the corporate strength of free enterprise companies has been destroyed. Any one who wants to see the figures needs to look only at the periods and the company liquidity figures published at the end of last week which showed that in the aggregate of four years from 1974 to 1977, on the assumptions the Chancellor has put before the House, the entire corporate sector of Britain will be short of £1 billion in cash. How on earth after four years is the corporate sector supposed to be rising with enthusiasm to new investment when, as a result of the policies of this Government and nothing else, it has lost £1,000 million of its cash resources?
The second opportunity which the Labour Party would argue is that in fact the markets are now improving. I would be the first to say that overseas markets are improving. First, world trade is improving. However, the fact is that, as a result of the decline in sterling arising from inflationary policies at home, Britain must export about four units for every three that it had to export when the Chancellor came to power. So the


British working people must work one-and-a-third times as hard to stand precisely still after two years of Labour Government.
The next argument is that the home market may do a little better. So it will. The surveys issued in today's Financial Times make clear that there will be a pick-up in the course of the next few months, but it is a pick-up from levels which the Secretary of State for Prices and Consumer Affairs has herself described as being worse than anything since the end of the 1950s.
As a non-pick-up situation would have been catastrophic. British industrial investment may well rise, and will rise, because profits have risen slightly, but it will not make up for the damage of the past two years and the next two years. Industrial investment has fallen and a higher proportion of investment will have to go to repairs and renewals and not to new capital accretion. More and more Government legislation of a social nature has repercusions for the capital budgets of investment in industry, and this is a wholly non-productive addition to their capital.
The fact is that the home market is being depressed by the Chancellor, and I do not complain about that. It is a necessity—I accept it at once—but the Chancellor is doing it and therefore the private sector will have no alternative but to respond to that situation.
Those are the overwhelmingly significant issues which will influence the private sector in reaching decisions about investment. It is a complete misrepresentation of the situation for Labour Members to talk about there being a strike of capital, about the industrial sector having decided not to co-operate with the Government. That sector of the economy will respond to profits and nothing else. Unless hon. Members opposite decide to accept that situation, they must put in its place another system which can work more effectively.
Hon. Members on the Treasury Bench are moving to what they call selectivity. Their latest view is that, provided that the Government clamp down on the broad budget of British industrial companies, impose price controls and dividend restraints, and determine invest-

ment, they can make up for the harm they do by looking for the bottlenecks, by looking for the companies which with a little aid here and help there will step up their investment programme, thus enabling us to get a new regeneration of British industry.
As anybody who takes an objective look at the activities of politicians in this country knows, selective aid for industry has led to the least efficient investment of national resources anywhere in the industrial spectrum, and nowhere more than in the nationalised industries, but now increasingly where politicians have intervened in private industry. How much better Leyland Motors would be today if they had not been persuaded by the Minister to join with a company which was losing money. How much better today would Norton Villiers be if it had not been persuaded to become involved in the Meriden problems. I am not suggesting that that was a failure of the Labour Government, although I would say that the then Secretary of State for Industry doubly compounded the problems which were already being created.
How much of the constituency interests of hon. Members opposite has been prejudiced by the commitment of £162 million to rescuing Chrysler? How is it that a Government who can use all the language about backing success and earning profits, within days of doing so be told, and have recorded by an all-party Select Committee of this House, that what they did on that occasion was the worst way of rescuing an industrial company which could ever have been devised? These are the reasons why increasing selectivity is a much doubted concept within the industrial world.
May I quote a letter which has been sent to the Chancellor of the Exchequer by a company, whose name I cannot give because figures which I now intend to quote could, if made public and associated with the company, be damaging to the best interests of that company. In fact, the letter has gone to the Chancellor of the Exchequer. [HON. MEMBERS: "Read it."] Oh yes, I shall read it. It comes from precisely the sort of enginering company on which we depend if the country's economy is to get off the ground again.
The Chancellor was sent the following letter:
We calculate that the direct effect of your measures upon our company will be to take £660,000 per annum out of our cash flow, an amount equal to about 12 per cent, of our profits, by increasing insurance contributions and reducing regional employment premiums… We know that increasing capital investment and sustaining employment are two of the Government's principal aims with regard to the manufacturing industry. How can this move of yours be anything except directly contrary to these objectives? Surely this crippling blow must be reconsidered.
That is the attitude of a company which would want to try to co-operate in restoring the health of the British economy.
We come to the question posed in all sincerity by the hon. Member for Tottenham (Mr. Atkinson) when he put before a deserted House the fundamental dilemma which faces Labour Members They have not got it within their gift to creatae the framework within which the free enterprise system can flourish. It is not within their gift because too significant a part of their power base in the trade unions and in the constituencies has no interest in seeing the free enterprise system succeed in this country. So long as we have the faltering compromises which the Chancellor brings to this country in default of an economic strategy, so he will continue to debilitate the prospect of our recovery.
My right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) was right when he made it clear that the one way in which we can get the country's standard of living in any way comparable with the standards of living enjoyed by our competing economies is to back the free enterprise system. Until we adopt measures wholeheartedly to do that, we shall be left with a compromise, the consequences of which are vastly debilitating to the British economy and have succeeded in the last couple of years in holding back any reasonable prospect of a restoration of the upward movement of the British standard of living.

9.35 p.m.

The Chief Secretary to the Treasury (Mr. Joel Barnett): A glance at the facts would expose the emptiness of the speech of the hon. Member for Henley (Mr. Heseltine). Not one constructive point was made in the whole of his speech. It was

wholly irrelevant to the industrial problems that we face.
A glance at one or two of the facts makes the position clear. Manufacturing production between 1955 and 1973 showed an average annual growth in the United Kingdom of 2·8 per cent. That was a period when there was some responsibility in the hands of Opposition Members. In the same period the average annual growth in Japan was 13·7 per cent., in Italy 7·1 per cent., in France 6 per cent., in Germany 5·9 per cent., and in the United States 4·3 per cent. The facts are clear and there should be some humility on the part of those who were in successive Governments during that period.
That is the background, and I hope that we can at least agree that those trends have to be reversed. That is one of the central problems about which the hon. Gentleman said nothing. He showed not the slightest recognition of the serious problems. The country desperately wants to hear rather more constructive arguments than we have had from the hon. Gentleman this evening, although we understand the pressures he is under from his right hon. Friend the Leader of the Opposition and some of the wilder elements in his party, sometimes not excluding himself.
I shall come later to the hon. Gentleman's criticism of the national insurance surcharge, but there are few responsible industrialists who will recognise any reality in the hon. Gentleman's general criticism of the Government's industrial policy. He overlooked, for example, the stock relief scheme, which has been widely welcomed. The total benefit of that to industry in reduced tax will be about £3,145 million in the years 1974–75 to 1976–77.

Mr. Heseltine: Taking into account all the actions of this Government, those they have just announced and those taken since they came to power, the corporate deficit will be £1 billion.

Mr. Barnett: The hon. Gentleman is remarkable. He spent the whole of his time saying nothing and then intervenes to do the same. It is absurd.
The hon. Gentleman tells us constantly of his contact with industry, but he does not seem to talk to those who are really involved in industry [An HON. MEMBER: "He is involved."] I hope, for the


sake of the country, that he does better than when he makes speeches in the House.
The hon. Gentleman talked about the Price Code and the need to abolish it. That, in effect, is what he said. But industry has shown rather more sense than the hon. Gentleman. It knows that its opposite numbers on the trade union side have shown a unique sense of responsibility in accepting a pay deal under which their members will suffer a cut in personal living standards. They know that that deal, with all that it means for industrial peace, could not have been achieved if the Price Code had been abolished.
I am sure that industry and the country recognise that whichever economic strategy is adopted—I shall say something about employment and what has come to be known as the alternative strategy later—they will have to improve the relatively poor performance of industry under successive Governments. Any strategy has to start from the regrettable fact not that public expenditure has grown too fast but, as some of my hon. Friends have indicated, that the growth has not been matched by the growth of GDP.
As fast as the growth in public expenditure has been in some areas, I know that there are many programmes to which many of my hon. Friends would like to devote even more public expenditure. However, as my hon. Friend the Member for Birmingham, Erdington (Mr. Silverman) pointed out, we must earn it first. I hope that we shall not forget that there has been substantial growth in programmes that are of top priority for the Labour Party. Social security expenditure has increased by nearly 25 per cent. in real terms from 1973–74 to 1976–77. There has been an increase of over 20 per cent. in housing expenditure over the same period.
Unfortunately, whatever strategy is adopted, we cannot allow public expenditure to grow at that pace. As I have said elsewhere, it would require impossibly high levels of borrowing or unacceptably large increases in taxation or both.
My hon. Friend the Member for Paddington (Mr. Latham) asked me a number of questions. He asked whether the

borrowing would not be different if it were for capital rather than for revenue matters. Of course it would be different in economic terms, but when we are borrowing as much as we are at present, it is no use saying to the people from whom we are borrowing money "Now we want it for this or that purpose." We have already been borrowing far too much.
But even if the borrowing were available and the tax increases acceptable, the growth of public expenditure at recent levels could not be financed without serious consequences for industry. This will especially be the case in 1977–78, when all the signs are that manufacturing output will be growing very fast. Even the hon. Member for Henley had to concede that there were some signs of that. If we are to make room for this growth, particularly for industry to take advantage of export opportunities, which now exist as never before since the war, it is essential that finance should be available both for increased working capital requirements and for new investment without an excessive increase in money supply.
The hon. Member for Henley talked about the period 1972–73 and quoted his right hon. Friend the Member for Leeds, North-East (Sir K. Joseph). He cannot have heard his right hon. Friend's many other speeches in which he told us the consequences of that Government in the years 1972 and 1973. But the hon. Gentleman always forgets these little matters.
We have therefore made it clear that it is our intention to bring down the borrowing requirement to £9 million or less in 1977–78, if the economy develops as we expect. I must tell the right hon. and learned Member for Surrey, East (Sir G. Howe), with the greatest respect, that we heard a better speech in one minute from the right hon. Member for Leeds, North-East than he himself made in over half an hour. He seemed, surprisingly, never to have heard of the general Government financial deficit, which will be reduced from just under 6 per cent. of GDP this year to 3 per cent. next year.
Some of my hon. Friends feel that we might have gone too far, that the borrowing requirement might fall too fast, with too serious an effect on employment. I understand their concern, but if they are


right, that is a much easier problem to deal with quickly than what might be called the downside risk if resources are not available because too much is being taken to finance the Government deficit. We are committed, with the TUC, to ensuring that that will not happen. That is why, in addition to the other steps to emphasise our industrial priority, we have taken additional steps to direct bank lending to priority areas.
But I know that each of the expenditure cuts will of course be unpalatable to some people—not least, in certain instances, to those who are pressing us hardest to make even bigger cuts.

Mrs. Castle: Will my right hon. Friend now answer the question that I put to the Chancellor but that he refused to answer? What is the Treasury's current estimate of the level of unemployment by the end of 1977?

Mr. Barnett: It is funny that my right hon. Friend should ask that, because I am coming to the whole subject of unemployment during my speech. As it happens, my right hon. Friend the Chancellor dealt with the matter: he spent a long time on it.

Mr. Heffer: Following the question put by my right hon. Friend the Member for Blackburn (Mrs. Castle), could the Chief Secretary also give the estimate of the borrowing requirement as the result of the high level of unemployment at the moment? Is it £2 billion or £3 billion? What exactly is the cost, including, of course, loss of production?

Mr. Barnett: As I said, I shall be dealing with the whole subject of unemployment in a moment.
But I was dealing with the expenditure cuts themselves. I was saying that I understand that some of my hon. Friends find them unpalatable. But a number of Opposition Members have complained bitterly about the defence cuts. They did so while supporting demands for even bigger cuts in public expenditure.
On previous occasions they made it clear that they could not support defence cuts then made. We were told by the Leader of the Opposition at the weekend that she "Will fight the cuts all the way". She obviously was not speaking for her right hon. and learned

Friend the Member for Surrey, East because in "Panorama" on 22nd July he was asked by Robert Mackenzie about defence cuts:
So you would not have made those cuts?
The right hon. and learned Gentleman replied:
I would again look at that because even there there may be administrative tails and areas that can be cut without cutting the real teeth of the defence forces".
Perhaps he and the Leader of the Opposition will get together and tell us what they are proposing to do about defence expenditure.
Some of my hon. Friends want even bigger cuts in defence expenditure, and I appreciate the views of my hon. Friend the Member for Salford, East (Mr. Allaun). But I know that it is easier for some of my hon. Friends who are pacifists or are prepared for major unilateral disarmament, but we have to take a balanced view and there is £100 million worth of defence cuts in the package.
Another part of the package which has come under fire is the nationalised industries capital programmes—although the right hon. and learned Member for Surrey, East has ruled out cuts even in that area. We are talking of a total of about £3,310 million and there has been an increase in that capital expenditure of 40 per cent. between 1973–74 and 1976–77. It is impossible to be precise about figures of that magnitude and, as will be known, this is an area of public expenditure where there is frequently a shortfall. A total of £157 million savings within all the nationalised industries will not harm the basic capital programmes, a growing part of which will be self-financed in future.
There are two areas of public expenditure savings which I hope will be generally recognised as right even if we had not been concerned to cut public expenditure. I hope that my hon. Friend the Member for Paddington, who said that he was against all cuts, will also recognise them as right. I refer to the levy on insurance companies to offset the full cost to the National Health Service of treating road accident cases at a provisional saving of £40 million in a full year and the saving of about £10 million from restricting the entitlement to unemployment benefit of certain occupational pensions. The latter is an attempt


to deal with a well-known abuse whereby occupational pensioners who have no intention of genuinely seeking work are nevertheless drawing unemployment benefit.
Another programme which I know troubles some of my hon. Friends is school meals. Hon. Members should be aware that by September 1977, when the 10p increase takes place, the charge will have been unchanged for two and a half years. I know that the increase will be hard on some large families, but even after the increase the subsidies will amount to 50 per cent. of the cost, and of course we shall be protecting parents with the lowest incomes.
Given our limited resources, it is not only essential but right in terms of our priorities to direct our help to those in greatest need rather than to give indiscriminate subsidies at high cost, so ensuring that there is less available for other programmes which are of high priority to all of us on this side of the House.
My right hon. Friend the Member for Blackburn (Mrs. Castle) and my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) have expressed anxiety about unemployment. I understand their concern, but it should be recognised that the cuts that we are talking about are not in this year, when unemployment is sadly rising, but in 1977–78—that is, they will come when the economy will have been moving out of the recession for some time.
There are, as ever, conflicting forecasts from many economists who help us—if that is the right word—with their advice. I always envy the certainty some hon. Members have about one set of forecasts over another. [HON. MEMBERS: "Unemployment forecasts."] Conservative Members should not even be commenting on unemployment, as every policy they suggest would add to its level.
I prefer the view expressed recently to the General Sub-Committee of the Expenditure Committee. It has been quoted, incorrectly I believe, in this debate. It is that whilst it was possible to use a credible rule-of-thumb method to calculate unemployment figures from a particular set of measures, the rule was much less appropriate when one was looking far ahead, when, apart from other factors, time lags distorted the picture. We are

talking about a period into 1978 and 1979, when the economy will be well on the upturn.
The differences of opinion among economists will be of little consolation to those directly affected. I know of the great concern of my hon. Friends, and I take their criticism much more readily than that of Opposition Members, who propose bigger public expenditure cuts and increases in VAT. The consequences for employment would be much more severe than the national insurance surcharge. Compared with other taxes, it has a smaller and delayed effect on prices, employment, or real take-home pay. It does not come into force until April 1977, when company profits will be rising substantially, as the hon. Member for Henley knows very well. Therefore, I have much more sympathy with my hon. Friends, who at least put forward an alternative strategy that they hope and believe would reduce unemployment.
I believe that they are mistaken in that belief, for a failure to cut public expenditure—indeed, an increase in it, as many of my hon. Friends want—would have very serious consequences both for interest rates and the exchange rate, which in turn would have very serious consequences for prices and employment. I know that my hon. Friends want a much more fundamental change than merely to increase public expenditure. They want import controls. I understand that view and sympathise with the reason for it, but if we had a policy of import controls we should have to assume things that are, to put it mildly, unlikely to happen.
We should have to assume that there would be little or no retaliation and, despite the huge international pressure to remove the controls as quickly as possible, that manufacturing industries would have sufficient certainty to invest and increase employment. It is extremely unlikely. It is already clear that our manufacturing industry will be growing as fast as is technically feasible next year, so that the reduction in imports would simply lead to a diversion of exports to the home market. Therefore, import controls would be of little help in dealing with the problem of unemployment in the short term.
Nevertheless, I understand my hon. Friends who find public expenditure cuts


unpalatable desperately searching for an alternative that they hope will avoid the necessity of making cuts that we all find unpleasant. I recognise their alternative as a serious strategy. As my hon. Friend the Member for Tottenham (Mr. Atkinson) was quoted in The Times today as saying,
One thing is absolutely clear: neither the left nor the right can promise jam, either today or tomorrow.
I turn to the Opposition motion. [Interruption.] I am surprised that the Opposition do not want to hear about it.

Mrs. Castle: rose—

Mr. Barnett: I am—

Mrs. Castle: rose—

Mr. Speaker: Order. The right hon. Lady knows that if the Minister does not give way, she must resume her seat.

Mr. Barnett: I am extremely surprised that the Opposition do not want to hear a little about their motion. [HON. MEMBERS: "Answer Barbara."] I should like to deal briefly with what the Opposition would have done. I understand that they want larger public expenditure cuts.

Hon. Members: Answer.

Mr. Speaker: Order. I cannot hear the Minister, and I want to do so.

Mr. Barnett: The right hon. and learned Member for Surrey, East was asked on the programme to which I have referred—[HON. MEMBERS: "Not again."] Oh yes, the Opposition are going to hear this. According to the transcript, the right hon. and learned Gentleman was asked:
What would be the size of the cuts the Opposition want? Are you aiming at £2

million, £3 million or £4 million? (Sir Geoffrey): It is difficult to put it that way. (Mackenzie): I still want to get an answer. Could you give us a figure?
But nothing was heard from the right hon. and learned Gentleman for a little while, until he said:
Getting on for twice as much.

Unlike my hon. Friends, who at least put forward an alternative strategy, all we get from the Opposition is a policy that will lead to increased unemployment as the inevitable consequence of the massive cuts they propose. The Opposition want to increase unemployment. Industry may not like the 2 per cent. increase in national insurance surcharge, but its effect on costs will be less than the Opposition are proposing. They do not offer a real alternative.

I ask the House to reject their motion. They are seeking to reduce my right hon. Friend's salary. They could not even find a motion that would unite their own supporters. The fact is that they have nothing to offer. They have no real alternative. They offer a recipe for disaster, and I ask the House to reject their motion.

Mr. Victor Goodhew: Will the Chief Secretary now answer his right hon. Friend the Member for Blackburn (Mrs. Castle) about the level of unemployment in 1977?

Mr. Humphrey Atkins: rose in his place and claimed to move. That the Question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly, That Subhead B1(1) be reduced by f6,500:—

The House divided: Ayes 283, Noes 295.

Division No. 306.]
AYES
[10.00 p.m.


Adley, Robert
Berry, Hon Anthony
Buchanan-Smith, Alick


Aitken, Jonathan
Biffen, John
Buck, Antony


Alison, Michael
Biggs-Davison, John
Budgen, Nick


Amery, Rt Hon Julian
Blaker, Peter
Bulmer, Esmond


Arnold, Tom
Body, Richard
Butler, Adam (Bosworth)


Atkins, Rt Hon H. (Spelthorne)
Boscawen, Hon Robert
Carlisle, Mark


Awdry, Daniel
Bottomley, Peter
Chalker, Mrs Lynda


Bain, Mrs Margaret
Bowden, A. (Brighton, Kemptown)
Channon, Paul


Baker, Kenneth
Boyson, Dr Rhodes (Brent)
Churchill, W. S.


Banks, Robert
Brains, Sir Bernard
Clark, Alan (Plymouth, Sutton)


Beith, A. J.
Brittan, Leon
Clark, William (Croydon S)


Bell, Ronald
Brocklebank-Fowler, C.
Clarke, Kenneth (Rushcliffe)


Bennett, Sir Frederic (Torbay)
Brotherton, Michael
Clegg, Walter


Bennett, Dr Reginald (Fareham)
Brown, Sir Edward (Bath)
Cockcroft, John


Benyon, W.
Bryan, Sir Paul
Cooke, Robert (Bristol W)




Cope, John
Jessel, Toby
Rawlinson, Rt Hon Sir Peter


Cordle, John H.
Johnson Smith, G. (E Grinstead)
Rees, Peter (Dover &amp; Deal)


Cormack, Patrick
Johnston, Russell (Inverness)
Rees-Davies, W. R.


Corrie, John
Jones, Arthur (Daventry)
Reid, George


Costain, A. P.
Jopling, Michael
Renton, Rt. Hon Sir D. (Hunts)


Crawford, Douglas
Joseph, Rt Hon Sir Keith
Renton, Tim (Mid-Sussex)


Critchley, Julian
Kaberry, Sir Donald
Rhys Williams, Sir Brandon


Crouch, David
Kellett-Bowman, Mrs Elaine
Ridley, Hon Nicholas


Crowder, F. P.
Kershaw, Anthony
Ridsdale, Julian


Davies, Rt Hon J. (Knutsford)
Kimball, Marcus
Rifkind, Malcolm


Dean, Paul (N Somerset)
King, Evelyn (South Dorset)
Rippon, Rt Hon Geoffrey


Dodsworth. Geoffrey
King, Tom (Bridgwater)
Roberts, Michael (Cardiff NW)


Douglas-Hamilton, Lord James
Kirk, Sir Peter
Roberts, Wyn (Conway)


Drayson, Burnaby
Kitson, Sir Timothy
Rodgers, Sir John (Sevenoaks)


du Cann, Rt Hon Edward
Knight, Mrs Jill
Ross, Stephen (Isle of Wight)


Durant, Tony
Knox, David
Rossi, Hugh (Hornsey)


Dykes, Hugh
Lamont, Norman
Rost, Peter (SE Derbyshire)


Eden, Rt Hon Sir John
Lane, David
Royle, Sir Anthony


Edwards, Nicholas (Pembroke)
Langford-Holt, Sir John
Sainsbury, Tim


Elliott, Sir William
Latham, Michael (Melton)
St. John-Stevas, Norman


Emery, Peter
Lawrence, Ivan
Scott, Nicholas


Ewing, Mrs Winifred (Moray)
Lawson, Nigel
Scott-Hopkins, James


Eyre, Reginald
Lester, Jim (Beeston)
Shaw, Giles (Pudsey)


Falrbairn, Nicholas
Lewis, Kenneth (Rutland)
Shelton, William (Streatham)


Fairgrieve, Russell
Lloyd, Ian
Shepherd, Colin


Farr, John
Loveridge, John
Shersby, Michael


Fell, Anthony
Luce, Richard
Silvester, Fred


Finsberg, Geoffrey
McAdden, Sir Stephen
Sims, Roger


Fletcher, Alex (Edinburgh N)
MacCormick, Iain
Sinclair, Sir George


Fletcher-Cooke, Charles
McCrindle, Robert
Skeet, T. H. H.


Fookes, Miss Janet
Macfarlane, Nell
Smith, Dudley (Warwick)


Forman, Nigel
MacGregor, John
Speed, Keith


Fowler, Norman (Sutton C'f'd)
Macmillan, Rt Hon M. (Farnham)
Spence, John


Fox, Marcus
McNair-Wilson, M. (Newbury)
Spicer, Michael (S Worcester)


Freud, Clement
McNair-Wilson, P. (New Forest)
Sproat, Iain


Fry, Peter
Madel, David
Stalnton, Keith


Gardiner, George (Relgate)
Marshall, Michael (Arundel)
Stanbrook, Ivor


Gardner, Edward (S Fylde)
Marten, Nell
Stanley, John


Gilmour, Rt Hon Ian (Chesham)
Mates, Michael
Steel, David (Roxburgh)


Gilmour. Sir John (East Fife)
Mather, Carol
Steen, Anthony (Wavertree)


Glyn, Dr Alan
Maude, Angus
Stewart, Donald (Western Isles)


Godber, Rt Hon Joseph
Maudling, Rt Hon Reginald
Stewart, Ian (Hitchin)


Goodhart, Philip
Mawby, Ray
Stokes, John


Goodhew, Victor
Maxwell-Hyslop, Robin
Tapsell, Peter


Goodlad, Alastair
Mayhew, Patrick
Taylor, R. (Croydon NW)


Gorst, John
Meyer, Sir Anthony
Taylor, Teddy (Cathcart)


Gow, Ian (Eastbourne)
Miller, Hal (Bromsgrove)
Tebbit, Norman


Gower, Sir Raymond (Barry)
Mills, Peter
Temple-Morris, Peter


Grant, Anthony (Harrow C)
Miscampbell, Norman
Thatcher, Rt Hon Margaret


Gray, Hamish
Mitchell, David (Basingstoke)
Thomas, Dafydd (Merioneth)


Griffiths, Eldon
Moate, Roger
Thomas, Rt Hon p. (Hendon S)


Grimond, Rt Hon J.
Monro, Hector
Thompson, George


Grist, Ian
Montgomery, Fergus
Thorpe, Rt Hon Jeremy (N Devon)


Grylls. Michael
Moore, John (Croydon C)
Trotter, Neville


Hall, Sir John
More, Jasper (Ludlow)
Tugendhat, Christopher


Hall-Davis, A. G. F.
Morgan, Geraint
van Straubenzee, W. R


Hamilton, Michael (Salisbury)
Morgan-Giles, Rear-Admiral
Vaughan, Dr Gerard


Hannam, John
Morris, Michael (Northampton S)
Viggers, Peter


Harrison, Col Sir Harwood (Eye)
Morrison, Charles (Devizes)
Wainwright, Richard (Colne V)


Harvie Anderson, Rt Hon Miss
Morrison, Hon Peter (Chester)
Wakeham, John


Hastings, Stephen
Mudd, David
Walder, David (Clitheroe)


Havers, Sir Michael
Neave, Airey
Walker, Rt Hon P. (Worcester)


Hawkins, Paul
Nelson, Anthony
Walker-Smith, Rt Hon Sir Derek


Hayhoe, Barney
Neubert, Michael
Wall, Patrick


Heath, Rt Hon Edward
Newton, Tony
Walters, Dennis


Henderson, Douglas
Normanton, Tom
Warren, Kenneth


Heseltine, Michael
Nott, John
Weatherill, Bernard


Hicks, Robert
Onslow, Cranley
Wells, John


Higgins, Terence L.
Oppenheim, Mrs Sally
Welsh, Andrew


Holland, Philip
Osborn, John
Whitelaw, Rt Hon William


Hordern, Peter
Page, John (Harrow West)
Wiggin, Jerry


Howe, Rt Hon Sir Geoffrey
Page, Rt Hon R. Graham (Crosby)
Wilson, Gordon (Dundee E)


Howell, David (Guildford)
Panhaligon, David
Winterton, Nicholas


Howell, Ralph (North Norfolk)
Perclval, Ian
Wood, Rt Hon Richard


Hunt, David (Wirral)
Peyton, Rt Hon John
Young, Sir G. (Ealing, Acton)


Hunt, John (Bromley)
Pink, R. Bonner
Younger, Hon George


Kurd, Douglas
Price, David (Eastleigh)



Hutchison, Michael Clark
Prior, Rt Hon James
TELLERS FOR THE AYES:


Irving, Charles (Cheltenham)
Pym, Rt Hon Francis
Mr. Spencer Le Marchant and


James, David
Raison, Timothy
Mr. Cecil Parkinson.


Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
Rathbone, Tim





NOES


Abse, Leo
Fernyhough, Rt Hon E.
McNamara, Kevin


Allaun, Frank
Fitch, Alan (Wigan)
Madden, Max


Anderson, Donald
Flannery, Martin
Magee, Bryan


Archer, Peter
Fletcher, L. R. (Ilkeston)
Mahon, Simon


Armstrong, Ernest
Fletcher, Ted (Darlington)
Mallalieu, J. P. W.


Ashley, Jack
Foot, Rt Hon Michael
Marks, Kenneth


Ashton, Joe
Ford, Ben
Marquand, David


Atkins, Ronald (Preston N)
Forrester, John
Marshall, Dr Edmund (Goole)


Atkinson, Norman
Fowler, Gerald (The Wrekin)
Marshall, Jim (Leicester S)


Bagier, Gordon A. T.
Fraser, John (Lambeth, N'w'd)
Mason, Rt Hon Roy


Barnett, Guy (Greenwich)
Freeson, Reginald
Maynard, Miss Joan


Barnett, Rt Hon Joel (Heywood)
Garrett, John (Norwich S)
Meacher, Michael


Bates, All
Garrett, W. E. (Wallsend)
Mellish, Rt Hon Robert


Bean, R. E.
George, Bruce
Mendelson, John


Benn, Rt Hon Anthony Wedgwood
Gilbert, Dr John
Mikardo, Ian


Bennett, Andrew (Stockport N)
Ginsburg, David
Millan, Bruce


Bidwell, Sydney
Golding, John
Miller, Dr M. S. (E Kilbride)


Bishop, E. S.
Gould, Bryan
Miller, Mrs Millie (Ilford N)


Blenkinsop, Arthur
Gourlay, Harry
Mitchell, R. C. (Soton, Itchen)


Boardman, H.
Graham, Ted
Moonman, Eric


Booth, Rt Hon Albert
Grant, George (Morpeth)
Morris, Alfred (Wythenshawe)


Boothroyd, Miss Betty
Grant, John (Islington C)
Morris, Charles R. (Openshaw)


Boyden, James (Bish Auck)
Grocott, Bruce
Morris, Rt Hon J. (Aberavon)


Bradley, Tom
Hamilton, W. W. (Central File)
Moyle, Roland


Bray Or Jeremy
Hardy, Peter
Mulley, Rt Hon Frederick


Brown, Hugh D. (Provan)
Harrison, Walter (Wakefield)
Murray, Rt Hon Ronald King


Brown, Robert C. (Newcastle W)
Hart, Rt Hon Judith
Newens, Stanley


Brown, Ronald (Hackney S)
Hattersley, Rt Hon Roy
Noble, Mike


Buchan, Norman
Hatton, Frank
Oakes, Gordon


Buchanan, Richard
Hayman, Mrs Helene
Ogden, Eric


Butler, Mrs Joyce (Wood Green)
Healey, Rt Hon Denis
O'Halloran, Michael


Callaghan, Rt Hon J. (Cardiff SE)
Heffer, Eric S.
Orbach, Maurice


Callaghan, Jim (Middleton &amp; P)
Hooley, Frank
Orme, Rt Hon Stanley


Campbell, Ian
Horam, John
Ovenden, John


Canavan, Dennis
Howell, Rt Hon Denis (B'ham, Sm H)
Owen, Dr David


Cant, R. B.
Hoyle, Doug (Nelson)
Padley, Walter


Carmichael, Neil
Huckfield, Les
Palmer, Arthur


Carter, Ray
Hughes, Rt Hon C. (Anglesey)
Park, George


Carter-Jones, Lewis
Hughes, Mark (Durham)
Parker, John


Cartwright, John
Hughes, Robert (Aberdeen N)
Parry, Robert


Castle, Rt Hon Barbara
Hughes, Roy (Newport)
Pavitt, Laurie


Cocks, Michael (Bristol S)
Hunter, Adam
Peart, Rt Hon Fred


Cohen, Stanley
Irvine, Rt Hon Sir A. (Edge Hill)
Pendry, Tom


Coleman, Donald
Irving, Rt Hon S. (Dartford)
Perry, Ernest


Colquhoun, Ms Maureen
Jackson, Colin (Brighouse)
Phipps, Dr Colin


Concannon, J. D.
Jackson, Miss Margaret (Lincoln)
Prentice, Rt Hon Reg


Conlan, Bernard
Janner, Greville
Price, C. (Lewisham W)


Cook, Robin F. (Edin C)
Jay, Rt Hon Douglas
Price, William (Rugby)


Corbett, Robin
Jeger, Mrs Lena
Radice, Giles


Cox, Thomas (Tooting)
Jenkins, Hugh (Putney)
Rees, Rt Hon Merlyn (Leeds S)


Craigen, J. M. (Maryhill)
Jenkins, Rt Hon Roy (Stechford)
Richardson, Miss Jo


Crawshaw, Richard
John, Brynmor
Roberts, Albert (Normanton)


Cronin, John
Johnson, James (Hull West)
Roberts, Gwilym (Cannock)


Crosland, Rt Hon Anthony
Johnson, Walter (Derby S)
Robinson, Geoffrey


Crowther, Stan (Rotherham)
Jones, Barry (East Flint)
Roderick, Caerwyn'


Cryer, Bob
Jones, Dan (Burnley)
Rodgers, George (Chorley)


Cunningham, G. (Islington S)
Judd, Frank
Rodgers, William (Stockton)


Cunningham, Dr J. (Whileh)
Kaufman, Gerald
Rooker, J. W.


Dalyell, Tarn
Kelley, Richard
Roper, John


Davidson, Arthur
Kerr, Russell
Rose, Paul B.


Davies, Denzil (Llanelli)
Kilroy-Silk, Robert
Ross, William (Londonderry


Davies, lfor (Gower)
Kinnock, Neil
Rowlands, Ted


Davis, Clinton (Hackney C)
Lamborn, Harry
Sandelson, Neville


Deakins, Eric
Lamond, James
Sedgemore, Brian


Dean, Joseph (Leeds West)
Latham, Arthur (Paddington)
Selby, Harry


de Freitas, Rt Hon Sir Geoffrey
Leadbitter, Ted
Shaw, Arnold (Ilford South)


Dell, Rt Hon Edmund
Lee, John
Sheldon, Robert (Ashton-u-Lyne)


Dempsey, James
Lever, Rt Hon Harold
Shore, Rt Hon Peter


Doig, Peter
Lewis, Ron (Carlisle)
Short, Rt Hon E. (Newcastle C)


Dormand, J. D.
Lipton, Marcus
Short, Mrs Renée (Wolv NE)


Douglas-Mann, Bruce
Litterick, Tom
Sillkin, Rt Hon John (Deptford)


Duffy, A. E. P.
Lomas, Kenneth
Silkin, Rt Hon S. C. (Dulwich)


Dunnett, Jack
Loyden, Eddie
Silverman, Julius


Dunwoody, Mrs Gwyneth
Luard, Evan
Skinner, Dennis


Eadie, Alex
Lyons, Edward (Bradford W)
Small, William


Edge, Geoff
Mabon, Dr J. Dickson
Smith, John (N Lanarkshire)


Edwards, Robert (Wolv SE)
McCartney, Hugh
Snape, Peter


Ellis, John (Brigg &amp; Scun)
McDonald, Dr Oonagh
Spearing, Nigel


Ellis, Tom (Wrexham)
MacFarquhar, Roderick
Spriggs, Leslie


English, Michael
McGuire, Michael (Ince)
Stallard, A. W.


Ennals, David
MacKenzie, Gregor
Stewart, Rt Hon M. (Fulham)


Evans, Fred (Caerphilly)
Mackintosh, John P.
Stoddart, David


Evans, loan (Aberdare)
Maclennan, Robert
Stott, Roger


Ewing, Harry (Stirling)
McMillan, Tom (Glasgow C)
Strang, Gavin




Strauss, Rt Hon G. R.
Wainwright, Edwin (Dearne V)
Williams, Alan Lee (Hornch'ch)


Summerskill, Hon Dr Shirley
Walden, Brian (B'ham, L'dyw'd)
Williams, Rt Hon Shirley (Hertford)


Swain, Thomas
Walker, Harold (Doncaster)
Williams, Sir Thomas (Warrington)


Taylor, Mrs Ann (Bolton W)
Walker, Terry (Kingswood)
Wilson, Alexander (Hamilton)


Thomas, Jeffrey (Abertillery)
Ward, Michael
Wilson, Rt Hon Sir Harold (Huyton)


Thomas, Mike (Newcastle E)
Watkins, David
Wilson, William (Coventry SE)


Thomas, Ron (Bristol NW)
Watkinson, John
Wise, Mrs Audrey


Thorne, Stan (Preston South)
Weetch, Ken
Woodall, Alec


Tierney, Sydney
Weitzman, David
Woof, Robert


Tinn, James
Wellbeloved, James
Wrigglesworth, Ian


Tomlinson, John
White, Frank R. (Bury)
Young, David (Bolton E)


Tomney, Frank
White, James (Pollock)



Torney, Tom
Whitehead, Phillip
TELLERS FOR THE NOES:


Tuck, Raphael
Whitlock, William
Mr, Joseph Harper and


Urwln, T, W.
Willey, Rt Hon Frederick
Mr. James Hamilton.


Varley, Rt Hon Eric G.
Williams, Alan (Swansea W)

Question accordingly negatived.

Original Question again proposed.

It being after Ten o'clock, the debate stood adjourned.

Notice of objection having been given to a total amount on which the Question was to be put, Mr. SPEAKER proceeded, pursuant to Standing Order No. 18 (Business of Supply), to put forthwith the Question thereon.

CIVIL ESTIMATES 1976–77

Class XIV

Question put,
That a sum, not exceeding £524,957,900 be granted to Her Majesty out of the Consolidated Fund, to complete the sum necessary to defray the charge which will come in course of payment during the year ending on 31st March 1977, for expenditure in respect of the Services included in Class XIV of the Civil Estimates, as set out in House of Commons Papers 276 and 484:—

The House divided: Ayes 308, Noes 117.

Division No. 307.]
AYES
[10.16 p.m


Abse, Leo
Davidson, Arthur
Horam, John


Allaun, Frank
Davies, Denzil (Llanelli)
Howell, Rt Hon Denis (B'ham, Sm H)


Anderson, Donald
Davies, Ifor (Gower)
Hoyle, Doug (Nelson)


Archer, Peter
Davis, Clinton (Hackney C)
Huckfield, Les


Armstrong, Ernest
Deakins, Eric
Hughes, Rt Hon C. (Anglesey)


Ashley, Jack
Dean, Joseph (Leeds West)
Hughes, Mark (Durham)


Ashton, Joe
de Freitas, Rt Hon Sir Geoffrey
Hughes, Robert (Aberdeen N)


Atkins, Ronald (Preston N)
Dell, Rt Hon Edmund
Hughes, Roy (Newport)


Atkinson, Norman
Dempsey, James
Hunter, Adam


Bagier, Gordon A. T.
Doig, Peter
Irvine, Rt Hon Sir A. (Edge Hill)


Bain, Mrs Margaret
Dormand, J. D.
Irving, Rt Hon S. (Dartford)


Barnett, Guy (Greenwich)
Douglas-Mann, Bruce
Jackson, Colin (Brighouse)


Barnett, Rt Hon Joel (Heywood)
Duffy, A. E. P.
Jackson, Miss Margaret (Lincoln)


Bates, Alt
Dunnett, Jack
Janner, Greville


Bean, R. E.
Dunwoody, Mrs Gwyneth
Jeger, Mrs Lena


Benn, Rt Hon Anthony Wedgwood
Eadie, Alex
Jenkins, Hugh (Putney)


Bennett, Andrew (Stockport N)
Edge, Geoff
Jenkins, Rt Hon Roy (Stechford)


Bidwell, Sydney
Edwards, Robert (Wolv SE)
Johnson, James (Hull West)


Bishop, E. S.
Ellis, John (Brlgg &amp; Scun)
Johnson, Walter (Derby S)


Blenkinsop, Arthur
Ellis, Tom (Wrexham)
Johnston, Russell (Inverness)


Boardman, H.
English, Michael
Jones, Barry (East Flint)


Booth, Rt Hon Albert
Ennals, David
Jones, Dan (Burnley)


Boothroyd, Miss Betty
Evans, Fred (Caerphilly)
Judd, Frank


Boyden, James (Bish Auck)
Evans, loan (Aberdare)
Kaufman, Gerald


Bradley, Tom
Ewing, Harry (Stirling)
Kerr, Russell


Bray, Dr Jeremy
Ewing, Mrs Winifred (Moray)
Kilroy-Silk, Robert


Brown, Hugh D. (Provan)
Fernyhough, Rt Hon E.
Kinnock, Neil


Brown, Robert C. (Newcastle W)
Fitch, Alan (Wigan)
Lamborn, Harry


Brown, Ronald (Hackney S)
Flannery, Martin
Lamond, James


Buchan, Norman
Fletcher, L. R. (Ilkeston)
Latham, Arthur (Paddington)


Buchanan, Richard
Fletcher, Ted (Darlington)
Leadbitter, Ted


Butler, Mrs Joyce (Wood Green)
Foot, Rt Hon Michael
Lee, John


Callaghan, Rt Hon J. (Cardiff SE)
Ford, Ben
Lever, Rt Hon Harold


Callaghan, Jim (Middleton &amp; P)
Forrester, John
Lewis, Ron (Carlisle)


Campbell, Ian
Fowler, Gerald (The Wrekin)
Lipton, Marcus


Canavan, Dennis
Fraser, John (Lambeth, N'w'd)
Litterick, Tom


Cant, R. B.
Freeson, Reginald
Lomas, Kenneth


Carmichael, Nell
Garrett, John (Norwich S)
Loyden, Eddie


Carter, Ray
Garrett, W. E. (Wallsend)
Luard, Evan


Carter-Jones, Lewis
George, Bruce
Lyons, Edward (Bradford W)


Cartwright, John
Gilbert, Dr John
Mabon, Dr J. Dickson


Castle, Rt Hon Barbara
Ginsburg, David
McCartney, Hugh


Cocks, Michael (Bristol S)
Golding, John
MacCormick, Iain


Cohen, Stanley
Gould, Bryan
McDonald, Dr Oonagh


Coleman, Donald
Gourlay, Harry
MacFarquhar, Roderick


Colquhoun, Ms Maureen
Graham, Ted
McGuire, Michael (Ince)


Concannon, J. D.
Grant, George (Morpeth)
MacKenzie, Gregor


Conlan, Bernard
Grant, John (Islington C)
Mackintosh, John P.


Cook, Robin F. (Edin C)
Gray, Hamlsh
Maclennan, Robert


Corbett, Robin
Grimond, Rt Hon J.
McMillan, Tom (Glasgow C)


Cox, Thomas (Tooting)
Grocott, Bruce
McNamara, Kevin


Craigen, J. M. (Maryhill)
Hardy, Peter
Madden, Max


Crawford, Douglas
Harrison, Walter (Wakefield)
Magee, Bryan


Crawshaw, Richard
Hart, Rt Hon Judith
Mahon, Simon


Cronin, John
Hattersley, Rt Hon Roy
Mallalieu, J. P. W.


Crosland, Rt Hon Anthony
Hatton, Frank
Marks, Kenneth


Crowther, Stan (Rotherham)
Hayman, Mrs Helena
Marquand, David


Cryer, Bob
Healey, Rt Hon Denis
Marshall, Dr Edmund (Goole)


Cunningham, G. (Islington S)
Heffer, Eric S.
Marshall, Jim (Leicester S)


Cunningham, Dr J. (Whiteh)
Henderson, Douglas
Mason, Rt Hon Roy


Dalyell, Tarn
Hooley, Frank
Maynard, Miss Joan




Meacher, Michael
Robinson, Geoffrey
Thorne, Stan (Preston South)


Mellish, Rt Hon Robert
Roderick, Caerwyn
Thorpe, Rt Hon Jeremy (N Devon)


Mendelson, John
Rodgers, George (Chorley)
Tlerney, Sydney


Mikardo, Ian
Rodgers, William (Stockton)
Tinn, James


Millan, Bruce
Rooker, J. W.
Tomlinson, John


Miller, Dr M. S. (E Kilbride)
Roper, John
Tomney, Frank


Miller, Mrs Millie (llford N)
Rose, Paul B.
Torney, Tom


Mitchell, R. C. (Solon, Itchen)
Ross, Stephen (Isle of Wight)
Tuck, Raphael


Moonman, Eric
Ross, Rt Hon W. (Kilmarnock)
Urwin, T. W.


Morris, Alfred (Wythenshawe)
Rowlands, Ted
Varley, Rt Hon Eric G.


Morris, Charles R. (Openshaw)
Sandelson, Neville
Wainwright, Edwin (Dearne V)


Morris, Rt Hon J. (Aberavon)
Sedgemore, Brian
Walden, Brian (B'ham, L'dyw'd)


Moyle, Roland
Selby, Harry
Walker, Harold (Doncaster)


Mulley, Rt Hon Frederick
Shaw, Arnold (llford South)
Walker, Terry (Kingswood)


Murray, Rt Hon Ronald King
Sheldon, Robert (Ashton-u-Lyne)
Ward, Michael


Newens, Stanley
Shore, Rt Hon Peter
Watkins, David


Noble, Mike
Short, Rt Hon E. (Newcastle C)
Watkinson, John


Oakes, Gordon
Short, Mrs Renée (Wolv NE)
Weetch, Ken


Ogden, Eric
Silkin, Rt Hon John (Deptford)
Weitzman, David


O'Halloran, Michael
Silkin, Rt Hon S. C. (Dulwich)
Wellbeloved, James


Orbach, Maurice
Sillars, James
Welsh, Andrew


Orme, Rt Hon Stanley
Silverman, Julius
White, Frank R. (Bury)


Ovenden, John
Skinner, Dennis
White, James (Pollok)


Owen, Dr David
Small, William
Whitehead, Phillip


Palmer, Arthur
Smith, John (N Lanarkshire)
Whitlock, William


Park, George
Snape, Peter
Willey, Rt Hon Frederick


Parker, John
Spearing, Nigel
Williams, Alan (Swansea W)


Parry, Robert
Stallard, A. W.
Williams, Alan Lee (Hornch'ch)


Pavitt, Laurie
Steel, David (Roxburgh)
Williams, Rt Hon Shirley (Hertford)


Peart, Rt Hon Fred
Stewart, Donald (Western Isles)
Williams, Sir Thomas (Warrington)


Pendry, Tom
Stewart, Rt Hon M. (Fulham)
Wilson, Alexander (Hamilton)


Panhaligon, David
Stoddart, David
Wilson, Gordon (Dundee E)


Perry, Ernest
Stott, Roger
Wilson, Rt Hon Sir Harold (Huyton)


Phipps, Dr Colin
Strang, Gavin
Wilson, William (Coventry SE)


Prentice, Rt Hon Reg
Strauss, Rt Hon G. R.
Wise, Mrs Audrey


Price, C. (Lewisham W)
Summerskill, Hon Dr Shirley
Woodall, Alec


Price, William (Rugby)
Swain, Thomas
Woof, Robert


Radice, Giles
Taylor, Mrs Ann (Bolton W)
Wrigglesworth, Ian


Rees, Rt Hon Merlyn (Leeds E)
Thomas, Dafydd (Merioneth)
Young, David (Bolton E)


Reid, George
Thomas, Jeffrey (Abertillery)



Richardson, Miss Jo
Thomas, Mike (Newcastle E)
TELLERS FOR THE AYES:


Roberts, Albert (Normanton)
Thomas, Ron (Bristol NW)
Mr. James Hamilton and


Roberts, Gwilym (Cannock)
Thompson, George
Mr. Joseph Harper.




NOES


Aitken, Jonathan
Fry, Peter
Miscampbell, Norman


Alison, Michael
Gilmour, Sir John (East Fife)
Moate, Roger


Amery, Rt Hon Julian
Glyn, Dr Alan
Moore, John (Croydon C)


Banks, Robert
Goodhart, Philip
Morgan-Giles, Rear-Admiral


Beith, A. J.
Goodhew, Victor
Morrison, Charles (Devizes)


Bell, Ronald
Gow, Ian (Eastbourne)
Morrison, Hon Peter (Chester)


Bennetl, Sir Frederic (Torbay)
Gower, Sir Raymond (Barry)
Nelson, Anthony


Benyon, W.
Grist, Ian
Page, Rt Hon R. Graham (Crosby)


Biggs-Davison, John
Hamilton, Michael (Salisbury)
Rathbone, Tim


Body, Richard
Harrison, Col Sir Harwood (Eye)
Rees, Peter (Dover &amp; Deal)


Boscawen, Hon Robert
Hastings, Stephen
Renton, Tim (Mid-Sussex)


Bottomley, Peter
Hicks, Robert
Rhys Williams, Sir Brandon


Boyson, Dr Rhodes (Brent)
Hordern, Peter
Ridley, Hon Nicholas


Braine, Sir Bernard
Howell, Ralph (North Norfolk)
Rippon, Rt Hon Geoffrey


Bryan, Sir Paul
Hunt, John (Bromley)
Roberts, Michael (Cardiff NW)


Buck, Antony
Hutchison, Michael Clark
Roberts, Wyn (Conway)


Budgen, Nick
Jopling, Michael
Rodgers, Sir John (Sevenoaks)


Carlisle, Mark
Kellett-Bowman, Mrs Elaine
Royle, Sir Anthony


Churchill, W. S.
Kershaw, Anthony
Scott, Nicholas


Clark, Alan (Plymouth, Sutton)
Kimball, Marcus
Scott-Hopkins, James


Clarke, Kenneth (Rushcliffe)
King, Evelyn (South Dorset)
Shaw, Giles (Pudsey)


Cope, John
Kitson, Sir Timothy
Shepherd, Colin


Cordle, John H.
Knight, Mrs Jill
Shersby, Michael


Cormack, Patrick
Langford-Holt, Sir John
Sims, Roger


Crowder, F. P.
Lawrence, Ivan
Spicer, Michael (S Worcester)


Davies. Rt Hon J. (Knutsford)
Lawson, Nigel
Sproat, Iain


Dean, Paul (N Somerset)
Lester, Jim (Beeston)
Stainton, Keith


Dodsworth, Geoffrey
Lewis, Kenneth (Rutland)
Stanbrook, Ivor


Drayson, Burnaby
Loveridge, John
Steen, Anthony (Wavertree)


Durant, Tony
McAdden, Sir Stephen
Tapsell, Peter


Eden, Rt Hon Sir John
Macfarlane, Nell
Taylor, R. (Croydon NW)


Elliott, Sir William
MacGregor, John
Taylor, Teddy (Cathcart)


Fairbairn, Nicholas
Macmillan, Rt Hon M. (Farnham)
Tebbit, Norman


Farr, John
Marten, Nell
Trotter, Neville


Fell, Anthony
Mawby, Ray
Wainwright, Richard (Colne V)


Fletcher, Alex (Edinburgh N)
Mayhew, Patrick
Wakeham, John


Fox, Marcus
Miller, Hal (Bromsgrove)
Walder, David (Clitheroe)




Wall, Patrick
Wiggin, Jerry
TELLERS FOR THE NOES


Warren, Kenneth
Winterton, Nicholas
Mr. John Stokes and


Wells, John
Young, Sir G. (Ealing, Acton)
Mr. Michael Brotherton.

Question accordingly agreed to.

Mr. SPEAKER then proceeded, pursuant to Standing Order No. 18 (Business of Supply), to put forthwith the Question, That the total amount of the Votes outstanding for the year 1976–77 be granted out of the Consolidated Fund for the services defined in those Votes.

DEFENCE AND CIVIL ESTIMATES, 1976–77 (OUTSTANDING VOTES)

Question
That a sum, not exceeding £21,100,043,100, be granted to Her Majesty out of the Consolidated Fund to complete or defray the charges for Defence and Civil Services for the year ending on 31st March 1977, as set out in House of Commons Papers 266, 276, 483 and 484.
put and agreed to.

Bill ordered to be brought in upon the foregoing Resolutions by the Chairman of Ways and Means, the Chancellor of the Exchequer, Mr. Edmund Dell, Mr. Joel Barnett, Mr. Robert Sheldon and Mr. Denzil Davies.

CONSOLIDATED FUND (APPROPRIATION)

Bill to apply a sum out of the Consolidated Fund to the service of the year ending on 31st March 1977, to appropriate the supplies granted in this Session of Parliament, and to repeal certain Consolidated Fund and Appropriation Acts: and read the First time; to be read a Second time to-morrow and to be printed [Bill 214].

CROMARTY PETROLEUM ORDER CONFIRMATION BILL

Order for Second Reading read.

Motion made, and Question proposed, That the Bill be now read a Second time.

10.31 p.m.

Mrs. Margaret Bain: Before we vote on the Bill, there are some important questions that I want to put to the Secretary of State on behalf of my party.
Why did the Secretary of State take a different view from the inspector about the economic prospects of this refinery? How many jobs are involved in the development of this site? When will the work commence? Who has the resources now that the costs have risen from £100 million to £170 million? Will the Government give a grant to the company? Where will the oil come from? Will it all come from the North Sea or will some be imported? Is it to be a service refinery, basically responsible for the export of oil, or will it be used for domestic purposes? What are the prospects of secondary and tertiary development, leading to more jobs?
My party has strong views on the ownership of land in Scotland and this land is being transferred from one foreign landlord to another. If land in Scotland is to be used for economic development, there must be an element of Scottish control.
The Scottish Development Agency and the Highlands and Islands Development Board have compulsory purchase powers in Scotland. Why were they not consulted about this Bill?
I should appreciate the Secretary of State's attention, especially as his party claims to care about the land and the people of Scotland. Does the right hon. Gentleman not accept that there should be Scottish responsibility for the development?

Mr. Douglas Crawford: Has my hon. Friend noted that the Secretary of State, the Minister of State and the entire Government Front Bench have not been listening to a single word she has been saying? I hope that the people of Scotland will note that fact.

Mrs. Bain: I agree with my hon. Friend. We have asked 10 specific questions about this development in Scotland. I reiterate the most crucial point—will the Secretary of State for Scotland confirm that land in Scotland is being transferred from one foreign owner to another? What rights will the Scottish people have in that situation? I hope that those on the Government Front


Bench will have the courtesy to reply to this point before we move to a vote.

10.35 p.m.

Mr. John Wells: I beg to move the amendment standing in my name and that of my hon. Friend the Member for Faversham (Mr. Moate)—

Mr. Deputy Speaker (Mr. Oscar Murton): Perhaps I should explain that it is not customary to call this type of motion. We are dealing with the Question, That the Bill be now read a Second time, and the hon. Gentleman should speak to that Question.

Mr. Wells: I wish to oppose the Second Reading of the Bill. My hon. Friend the Member for Faversham and I, being two Kent Members, have been under a degree of criticism from certain sections of the Scottish Press. Mr. Michael Nightingale, who is at present the owner of the land which it is aimed to acquire by compulsory purchase, is my constituent.

Mrs. Bain: An absentee landlord.

Mr. Wells: I repeat, Mr. Michael Nightingale is my constituent.

Mrs. Bain: An absentee landlord.

Mr. Wells: The hon. Lady said "An absentee landlord" twice from a sedentary position. I heard her the first time. There was no need for her to repeat the interruption. I shall deal with her in due course.
Mr. Michael Nightingale is an absentee landlord except that he is in Cromarty at this moment on his property. He is a well-known public figure in Kent. He was awarded the OBE not long ago for his services to the general amenity of Great Britain and he has played a considerable part in maintaining the amenities on his estate and the surroundings.
The suggestion in the Bill is that Mr. Nightingale's property should be expropriated and a £100 company called Cromarty Petroleum Company Limited, whose proprietors are a Liberian fleet of tankers, owned in its turn by the Ludwig Cancer Research Foundation of Switzerland, which I believe is backed by a Central European American called Ludwig, who indeed would be, as the hon. Lady the Member for Dunbartonshire, East

(Mrs. Bain) has said, an expatriate landlord.
The point that I seek to make is that my constituent Mr. Nightingale—

Mr. Norman Buchan: On a point of order, Mr. Deputy Speaker. I am perplexed. Was the Second Reading of the Bill moved?

Mr. Deputy Speaker: Yes, it was moved formally.

Mr. Wells: My constituent Mr. Nightingale has taken considerable steps, as I have already said, to maintain the amenity of the area. [Laughter.] I do not know why the hon. Lady laughs. She has probably never even been there.

Mrs. Winifred Ewing: Give way.

Mr. Deputy Speaker: Order.

Mr. Wells: The hon. Lady can make her own speech in her own way. The fact remains that—

Mrs. Ewing: Hundreds of times.

Mr. Wells: The fact remains that my constituent has made—

Mrs. Ewing: Hundreds of times.

Mr. Wells: Belt up.

Mrs. Ewing: rose—

Mr. Deputy Speaker: Order. I appeal for courtesy in this House. Let there be no more sedentary interruptions.

Mr. Wells: My constituent has taken very many steps—[Interruption.] If the hon. Lady will be quiet, I shall proceed a little quicker, to the benefit of us all.

Mrs. Winifred Ewing: The hon. Gentleman is so unjustifiably rude.

Mr. Wells: My constituent has made a generous offer to the company of a 99-year lease to enable the company to build the dock. Naturally, those who oppose him say that they want to own the freehold and to be able to be there for ever. But those people who know anything about the oil and refinery position as a whole in the United Kingdom would agree that there is already a surplus of refinery capacity. It is extremely unlikely that this refinery will ever be built, no matter what is said here tonight. It is all pie in the sky.
It is almost certain that if Mr. Ludwig and his associates are allowed to expropriate my constituent, an American-Liberian company will own this foreshore, will be able to build a dock and will then be able to sell it for a much larger sum of money than would—

Mrs. Winifred Ewing: On a point of order, Mr. Deputy Speaker. Does the hon. Member not have enough knowledge to be aware that no one owns the foreshore in Scotland?

Mr. Deputy Speaker: That is not a matter of order. It is a matter of debate.

Mrs. Winifred Ewing: It is a matter of law.

Mr. Wells: The area in which the dock will be built is land the freehold of which at the moment belongs to my constituent. He has offered a 99-year lease and has been perfectly willing to meet them at any time.

Mrs. Bain: Is it not a fact that the length of the lease is irrelevant? It could be for 99 years or 999 years. The importance lies in the conditions under which the land is let. Therefore, is it not all the more important that there should be Scottish responsibility to ensure that local democratic wishes are respected?

Mr. Wells: I have great sympathy with the point of view expressed by the hon. Lady. I have recently suffered in my own constituency seeing an American firm take over one of our great local industries. I have great sympathy with the point of view which she has expressed, but it is a matter not so much of democratic need as of the extreme unfairness of the way in which Mr. Nightingale has been treated—and not only unfairness, but with the greatest of discourtesy.
When hon. Members put down a block on a Private Bill it is usual for the Parliamentary Agents to approach the hon. Members concerned. I have had no approach whatever from Dyson Bell and Co. who are the Parliamentary Agents concerned. Nor has my hon. Friend the Member for Faversham had any approach from them until one of that firm's minions waylaid him semi-socially last week in Westminster Hall. There has been no attempt whatever to have any sort of negotiation to find out what was

in my constituent's mind or to ascertain why he was opposed.
I believe that my constituent was willing to give a 99-year lease, as he said at the time that the Parliamentary Commissioners held their hearing in Edinburgh. In addition, on the point made by the hon. Lady the Member for Dunbartonshire, East, I believe that my constituent would have been willing to give a lease as long as there were clauses in it providing that a refinery really would be built. If no refinery were built, my constituent would want to retain the ownership of his land. [Laughter.] The Scottish National Party may find this amusing, but it is very serious. Perhaps the hon. Gentleman has constituents who have land in England. It is quite likely. If the boot were on the other foot, I would expect him to defend his constituent's interests. I see that the hon. Member for Perth and East Perthshire (Mr. Crawford) indicates dissent. Then he is a very bad Member of Parliament. I should normally expect a Member of Parliament to defend his constituents' interests in any part of the United Kingdom.
My constituent Mr. Nightingale, has done what is reasonable in the past. He has made a fair offer to the company, which has in no way responded. I believe that there are elements in the Scottish Press that like to think that if construction does not take place it will be the fault of my hon. Friend and me or some vague and remote English sector. That is not so. I have already said that there is an excess of refining capacity in this country, and I believe that Mr. Ludwig and his associates are looking only for an outlet for their tankers. I do not believe that they are looking for refining capacity. The major British oil companies already have North Sea oil connections and refining capacity. The intervention of some £100 company tied essentially to a Liberian fleet of tankers is a completely extraneous matter.
My hon. Friend and I have tabled two amendments. The first is, "That the Bill be read a Second time upon this day six months." The second is that if it receives a Second Reading tonight it should be referred to a Committee. The House has a serious duty to consider. When I put down this block I set out only to protect


the interests of my constituent, but since the block has been running I have read more and more on this topic and I have learned more and more. The more I learn the more convinced I am that this entire outfit is bogus and that the likelihood of this project coming to fruition is very small.

Mr. Russell Johnston: Will the hon. Gentleman make it clear that in making the allegation that the whole project is basically bogus he is saying, essentially, that the planning committees of Ross and Cromarty and the Highland Region, and the Secretary of State for Scotland, have all been gulled.

Mr. Wells: The hon. Gentleman need only look at yesterday's Sunday Times Business News in which exactly that phrase is used. It is not the job of the planning committees to look at the global, national position of refining. As for the Secretary of State being gulled, we are used to that and it has happened yet again.

Sir Timothy Kitson: What compensation has been offered to my hon. Friend's constituent for the 47 acres?

Mr. Wells: I speak without the authority of my constituent and only from what I have read in the papers. At one time there was a verbal suggestion of £200,000, from which position I understand that the petroleum company have reneged. I understand that at present a figure of around £75,000 is being discussed. This has been a degazumping situation. I have those figures secondhand and I do not speak with the authority of my constituent.
This is not only an area of potential great value for some future project, which should gladden the hearts of all Scottish Members, but an area of outstanding beauty. That point was made abundantly clear in front of the commissioners when they sat in Edinburgh. The matter has been debated at length and I do not wish to repeat it at length, but in looking at the prospects it is essential that we do not allow these people to rush in, expropriate an honest and innocent British landowner and pass it over to others.
The Scottish National Party has made great play that my constituent is an

absentee. In fact he is the chairman of a British public company which is in the habit of developing land overseas. He has great experience of this in the Far East. In his personal experience it is usual for a developing company to be given only a short lease. He tells me that the longest lease he has in the Far East at present is for about 30 years, and that vast sums of money are being put in.
This is a man of part-English, part-Scottish descent who is genuinely doing his best to protect the interests of his neighbours and of his co-owner, a well-known local figure, Colonel Ross.

Mr. David Penhaligon: As Member for a Cornish constituency, I have only a passing interest, but could the hon. Gentleman say how long his constituent has owned this land?

Mr. Wells: To the best of my recollection, he and his wife's family have owned it for 16 years. As for Colonel Ross, his co-proprietor, it has been in his family, to the best of my knowledge, for about 400 years.
We are not concerned with length of ownership. We are concerned with goodwill on the part of the present proprietor and the unfair treatment which has been meted out to him. We are also concerned with the fundamental financial unsoundness of the project. Figures have been lavishly bandied about. We are told that this project will mean an investment into Scotland of £200 million. It might do so if it were built, but before it is built there will have to be investment from Her Majesty's Treasury, from the British taxpayer—from each one of us and each one of our constituents—amounting, I understand, to £20 million. I therefore believe that I am absolutely right when I repeat that the Secretary of State and his Department have been well and truly gulled in this matter.

10.52 p.m.

Mr. Tam Dalyell: We had all better be a bit careful on this occasion about declaring any interests we have. I would therefore say that in the town of Bo'ness in West Lothian a substantial number of people work in the Grangemouth refinery.
I want to ask a basic question. What is the case at all for another green fields construction? We are told by the oil


companies—not just by one—that there is a 60 per cent. use of existing capacity both in the United Kingdom and in Europe and that future projections—this is very much the point—into the 1980's suggest that that proportion is unlikely to be exceeded.
One can talk perhaps about the plight of the refining industry. I am not sure that I would go so far as to do that, but before any decision is reached, surely we should have an authoritative pronouncement about foreseeable demand in the 1980's. I understand from Cromarty that the argument is that Britain needs to obtain maximum benefit from North Sea resources by exporting as much as possible of the refined products rather than the crude oil. Is it or is it not true that Grangemouth and other United Kingdom refineries—but particularly Grangemouth—can do this? Some assessment of this is important.
The question that I should like to ask —it is an interrogative question because no doubt it had good reasons—is, why did the Scottish Office go against the recommendation of the reporter after a prolonged and costly inquiry? If we are to discuss this at all, it should be spelled out to the House why—possibly for good reasons—the Secretary of State overturned the findings of the reporter.
Has Press comment on the risk of oil spills been exaggerated? We also want to know what the plans are—because they involve public expenditure—for housing, schools and infrastructure for the 400 refinery workers. Are we sure that scarce resources should be allocated to the building of a petro-chemical industry in rural Easter Ross? That must affect every hon. Member from Scotland.

Mrs. Bain: Can the hon. Member say which other oil exporting country is cutting back on infrastructure? Great Britain is dragging Scotland back in the building of housing and schools which are desperately needed.

Mr. Dalywell: My views are well known and the House would not wish me to be tempted into arguing about all sorts of other subjects.
A question which has been put to me is, what is the effect on the Highland Fabricator employees at Nigg? That is important because many people from

elsewhere work at Nigg during the week. Some assessment would be useful.
Some months ago the capital cost was put at £175 million and I understand that that is likely to have risen to £200 million. The House deserves to know precisely—and I choose my words carefully— what is the role of National Bulk Carriers. It is understood that the seagoing tanker business is not very healthy at the moment and that shipping in certain New York based firms is slumping badly. Before we commit ourselves I must ask what the finance from National Bulk Carriers is likely to be. Again, I choose my words carefully and I do not want to be irrelevant, but perhaps some of us owe it to the House to say that we were approached last week with a letter from the public affairs consultant, Mr. Dean Narayn of 209 Brompton Road, Knightsbridge, London S.W.3. His letter to me began:
Dear Mr. Dalyell, I am writing on behalf of Cromarty Petroleum Company Limited, to seek to engage your interest in the above Bill, as it has serious implications for a major industrial project in Scotland.
Rightly or wrongly it is my practice, when approached on a matter of that kind by public affairs firms, not to reply to them but, if it is important, to go straight to the industrial company. I therefore quite innocently asked the Library who was the managing director of Cromarty Petroleum, and I was told that it was Mr. Jonathan Jenkins. That was a fair question because some of us have wondered what was the precise relationship between Cromarty Petroleum and the defunct Grampian Chemicals. We must know the answer to that because some of us were interested in the events which led to the end of Grampian Chemicals. The relationship may be innocent but we must be told what it is.
The matter is serious. If the debate goes on for a long time it may, for the future of Easter Ross in particular and for Scotland in general, be worth the time of the House to examine the matter in detail.

11.0 p.m.

Mr. Malcolm Rifkind: Two separate issues are involved in this matter. The first is whether the interests of Mr. Nightingale, co-owner of the land, are prejudiced by the action


proposed in the Bill. The second is the effect of the Bill on the development of an important part of Scotland.
On the latter issue I look forward to the views of my hon. Friend the Member for Ross and Cromarty (Mr. Gray), who represents that part of Scotland and knows better than any other hon. Member the development requirements of the area. I understand that he strongly supports the Bill. If he takes the view that such development will benefit the area, there will have to be powerful arguments to the contrary to convince the House that the development should be rejected, particularly when his views are in agreement with those of the Secretary of State and the Government as a whole.
I hope that the Government will comment on the report in the Sunday Times yesterday, which will concern many other hon. Members. That report suggested that the development was not a genuine attempt to improve the development of that part of Scotland but a bogus attempt, disguising itself as a genuine commercial effort but for other, less creditable purposes. Before we come to a decision on the matter the House must have an assurance not merely that the Government support the Bill but that they have made sufficient inquiries to satisfy themselves that the company's credentials are genuine and that the objectives it has put to the House in the Bill are objectives that it honestly means to implement. If the Government are satisfied that it does, that will greatly strengthen the arguments in favour of the Bill.
I hope that the Minister will totally reject the silly, puerile remarks of the hon. Member for Dunbartonshire, East (Mrs. Bain), who suggested that it was relevant to the debate whether the development would be Scottish controlled or controlled by a company outside. I do not know whether the SNP is opposed to any non-Scottish investment in Scotland. I do not know whether it opposes any development that is not Scottish controlled or does not have a Scottish interest in it. If it does, it is doing a great disservice to SNP Members' constituents and the industrial development of Scotland.

Mrs. Bain: rose—

Mr. Rifkind: I shall do what the hon. Lady refused to do to me, and give way.

Mrs. Bain: The hon. Gentleman was totally opposed to the idea of a Scottish Development Agency, which is democratically controlled in Scotland and has the right to carry out investment. We are arguing consistently that there is a right to have Scottish control, so that local views and local responsibilities are taken into consideration in any development, because the local community is obviously the most important community.

Mr. Rifkind: Any hon. Member who wants to know my views on the Scottish Development Agency will find them easily by consulting Hansard. I do not propose to go into the matter now. If the hon. Lady seriously believes what she said, that any investment that does not have Scottish control will be opposed by her party as being inimical to the interests of Scotland as she sees them, I hope that she and her hon. Friends will pronounce that philosophy from every platform in Scotland, and make it clear that that is what their party stands for. She would do more to contribute to the growth of unemployment in Scotland than anything even this pernicious Government can achieve by their policies.
I return to the main issue, which is a very important matter. Jobs and development are involved. The local Member is strongly in favour of the development. I shall be inclined to support it unless the Minister or other hon. Members can give substance to the serious allegations made in the newspapers only yesterday. If those allegations have a foundation they should lead hon. Members seriously to doubt the desirability of the development. If they do not, it is up to the Government to make that clear to the House so that the House may make an objective decision tonight.

11.5 p.m.

Mr. Norman Buchan: Anybody who wishes to take part in this discussion must do so with a certain amount of hesitation—for two reasons. The first is that some of the hon. Members involved with Ross and Cromarty, and indeed neighbouring Members concerned directly with the problems of Highlands development, can be said to be in favour of the development and the second is


that many of us have fought for years to develop Highlands areas. Therefore, one speaks with some hesitation when one has doubts about a project of this kind.
I think it can be said that there is cause for some real doubts. I am not referring to the doubts that have been expressed by SNP Members. They were reflecting a concern not about the ownership of land in the sense of its belonging to the people who live and work there but about ownership of land in another sense. I believe that the Scottish people have a higher moral standard than that. What concerns me is people—not whether somebody comes from the North or from the South. I am concerned about human beings. Therefore, we must see how this project will assist those who live and work in the area.
I am unashamedly in favour of the public ownership of land—not only Scottish public ownership of land but English public ownership of land. Therefore, I, too, share some of the anxieties which have been expressed about land being trafficked in this way. I am concerned that this land should be put to proper use. That means that we must also consider the environmental aspects of the matter.

Mr. Nicholas Fairbairn: rose—

Mr. Buchan: I shall not give way. The hon. and learned Gentleman has just come in—and he is a nuisance when he comes in anyway.
I am concerned to see that development should happen in the right places. I believe that in the past the Government should have said "We shall allow X number of developments to take place in the following areas", but they should then have set them out, instead of allowing unrestricted options in respect of onshore construction sites. I am concerned about the employment situation in Easter Ross in the next five or 10 years. One understands the anxieties about industrial projects having to come into the area. However, we must try to ensure that this, too, is not another "empty hole", to use that phrase in a metaphorical sense.
These matters cause one to pause for reflection. We all remember an earlier application relating to Grampian Chemi-

cals. We have reason to be anxious when we know that one of the directors then involved is now named as one of the directors involved in this instance. I refer to Mr. Jonathan Jenkins. I should like to know what guarantees have been given in regard to this company. We know that in this instance we have involved not only National Bulk Carriers, with friend Ludwig, but a cancer research institute in Switzerland. It is a curious set-up that this concern should be tied up with a company operating bulk carriers registered in Panama and flying the Liberian flag. I am concerned about that kind of background.
Although I argue that there should have been a public take-over of land for onshore oil development and that the Government should have established the number of sites and their locations, at the same time it is we who should be considering the onshore development of oil in this country. In other words, there should not be a private refinery but a publicly-financed refinery, if there is a case for an additional refinery.
The problem is that no such case has yet been made. There is the problem of Grangemouth. As I understand it, there can be an expansion of production there. Some of the oil people tell me that there is no case for yet another green fields site refinery at present.
If it were to be associated with guarantees for further industrial development, petro-chemicals and so on, I would still think twice on environmental grounds. There is no such guarantee. I do not know what is being sought here. We should be told. We should know who is behind the company. Is this related to the failure of the large-scale bulk tanker market? Is there an element of speculation here? What oil will be used? We do not know. There are no direct oil resources. From whom will the oil be purchased? We do not know.
What guarantees have been given for future industrial development, petrochemicals for instance? We do not know. These are the questions to which we must have answers before we approve such a Bill. I can understand the Government's difficulty. They will have to argue on the basis of the correctness or otherwise of the inquiry in the sense that they have the right to override the inquiry decision, which was against the


project. But we are a House of Commons. Quite apart from the technical responsibilities of the Government, they have to look at the social and economic consequences of this action.
These are the guarantees we seek. I am sorry that we have started on the wrong route. Many of my hon. Friends who have fought and argued, and done a good deal for the development of industry in the Highlands, want an answer to these questions to make sure that we get the right kind of industrial development for the Highlands.

11.13 p.m.

The Secretary of State for Scotland (Mr. Bruce Milian): It might be for the convenience of the House if I intervened at this stage. As I understand it, there are two motions on the Order Paper, the second depending on whether the Bill is granted a Second Reading. At the moment we are dealing only with the Second Reading.
Despite the fact that a large number of rather wide-ranging questions have been asked in the debate, the Bill deals with a narrow issue. It deals with the compulsory purchase of a small piece of land, approximately 47½ acres, in a scheme for which already about 800 acres have been acquired by the company concerned. I hope that no one believes that what we are dealing with here, whatever happens to the Bill, is the whole of the project. I shall shortly explain the procedure and the formal role of the Secretary of State in this procedure, which places me under a certain amount of difficulty.
The hon. Member for Ross and Cromarty (Mr. Gray) will be able to deal with some of the wider matters that have been raised, if he so chooses and if he catches your eye, Mr. Deputy Speaker. Since some of those wider matters have also been put to me I can, without offending the rules of order, at least give a certain amount of background information, although the Bill is a narrow one and the question of the reference to the Joint Committee, if we come to that later, is a matter on which I would like to say a word or two.
This proposal for an oil refinery at Nigg Point has been the subject of a most exhaustive public inquiry. The application to the Secretary of State for a direc-

tion under Article 8 of the Town and Country Planning (General Development) (Scotland) Order 1950 was made on 11th October 1974. Following that, a public inquiry was held. That public inquiry was one of the lengthiest and most exhaustive public inquiries that we have ever had in Scotland. It lasted between 11th February and 18th April 1975, and there were more than 500 objections to the proposal which were considered at that public inquiry.
It does not seem to me to be appropriate for me to go over anything like the full range of the inquiry. In any event, I think it is the legal position that the Secretary of State's decision on an inquiry—in this case, my predecessor's—is confined to the decision letter which is legally binding and which was issued on 1st March 1976.
The decision letter of 1st March 1976 is a public document. As well as giving the reasons of the Secretary of State for overturning the recommendations of the reporter and granting the power on the part of the local authority to give the planning permission, there are, for example, eight foolscap pages of conditions attached to that approval. The idea that, somehow, this slipped through unnoticed and was not considered in the most exhaustive way both at the inquiry and by the Secretary of State is ludicrous.

Mr. Wells: These stringent conditions all refer to planning. They do not in any way refer to the actual construction of the refinery. There is no condition to protect the interests of my constituent if these people never build their refinery. Therefore, although person after person has said that there are conditions and restrictions, I would point out that there are no restrictions or conditions there to protect the one person on whose behalf all this has started tonight.

Mr. Milan: We must be clear whether we are dealing with the right of one individual who does not wish his land to be acquired compulsorily or with wider issues. This Bill is dealing with the right of one or two individuals to have their land acquired compulsorily, but that has not been completely clear from the speeches to which we have listened so far. I am simply providing a certain amount of the background, without going into the detailed merits of the proposal


They have been exhaustively considered. There was a very lengthy inquiry and a very long report, and the Secretary of State took account of the findings of that report in reaching his decision.
The objections which were outlined by the reporter to the development did not include most of the matters which have been raised tonight about the viability of the project, whether it would go ahead, the status of the company concerned, and all the rest of it.
Any Secretary of State, including my predecessor and including me, is not a completely free agent in deciding planning matters. Like everyone else, he is bound by the planning legislation. All the matters that were relevant to the decision of the Secretary of State, and these matters of demand, the status of the company, where the oil would come from and what would happen to the products, were exhaustively considered at the inquiry and taken into account by my right hon. Friend in giving what was a very lengthy decision letter, itself of six foolscap pages, quite apart from the conditions. This is on public record, and I do not think that it would be right for me now to try to go over the whole of that ground. We are dealing with one of the consequentials of the matter—the question of the acquisition of the ground required for the building of the refinery.
Perhaps I might now explain the Secretary of State's position so that there is no misunderstanding in the House. Under the Private Legislation Procedure (Scotland) Act, where a provisional Order under that Act is opposed, as in this instance, an inquiry is held before Parliamentary Commissioners. This inquiry takes place in Scotland. The commissioners normally consist of two Members of this House and two Members from the other place. Promoters and objectors, represented by counsel, appear before the Commissioners and lead evidence.
Following the hearing, the Commissioners recommend to the Secretary of State, in the form of a report, that the order should be issued or should be rejected or should be issued with modfications. In this case the Commissioners, after sitting for two days in May this year in Edinburgh and hearing the arguments of the parties, recommended that the

order should be confirmed with slight modifications.
If the order is issued by the Secretary of State, as it has been in this case, it is then submitted to Parliament in the form of a Confirmation Bill, which is deemed to be a public Act. In doing that, the Secretary of State's role is more or less formal. I hope that is clear. That is regardless of the history of this project and the view taken by my predecessor about the planning application, which is the genesis of the Bill.
In theory, the Secretary of State could refuse to accept the recommendations of the Parliamentary Commissioners, but successive Secretaries of State have honoured the undertaking given during the passage of the Private Legislation Procedure (Scotland) Act 1933—consolidated in the 1936 Act—that the Secretary of State would treat such recommendations with the fullest respect and would not set them aside, save in exceptional circumstances.
Thus, in submitting to Parliament an order which has been the subject of an inquiry—as I am doing now—the Secretary of State is not to be taken as expressing a view on the merits of the order, but merely as enabling the appropriate parliamentary procedure to take place.
If on that basis the Bill is given a Second Reading, the wider questions posed by the hon. Member for Ross and Cromarty may be dealt with. However, I hope that I have explained enough of the general background to help the House on that matter.
There is a second motion on the Order Paper about reference of the matter to a Joint Committee. It would have been convenient had I been able to explain that matter at this stage, but, as we are talking only about the first motion, not the second, it will probably be better for me to consider the Joint Committee motion a little later.
The Bill has been the subject of inquiry by colleagues in this House and in the other place. They have gone over the arguments and no doubt listened to a number of the arguments that have been deployed tonight. Having listened to those arguments, they have recommended the order for confirmation by means of a Bill. That is the purpose of the Bill before us.
To sum up, the matters with which we are concerned tonight have been dealt with at considerable length at the public inquiry, by the Secretary of State and by the planning authorities. I understand that the planning authorities are not just in favour but are enthusiastically in favour of the proposal. I understand that it is also generally welcomed in the area and by the hon. Member concerned.

Mr. Buchan: My right hon. Friend has explained the narrowness of his locus in this matter in relation to the Bill. Could he indicate whether the wider aspects relating to the expectations and nature of the company will come across his desk or to this House for consideration at another time.

Mr. Milian: What the House and my hon. Friend must understand is that in making a decision about a planning application, the Secretary of State decides on the basis of matters that are relevant to the planning application. It is basically a planning decision. I am not saying that the status of a particular company applying for a planning decision is not relevant to the inquiry. In a case such as this, these matters are very considerably dealt with during the inquiry. If hon. Members wish to look further into this matter, I recommend them to read the very lengthy extensive report of the inquiry. I forget the number of volumes of evidence attached to it, but it is considerable.
I repeat that this was one of the most exhaustive inquiries that we have ever had in Scotland. The common public complaint for a very long time in Scotland—I make no comment on its validity at present—was that the whole process was taking an unconscionable amount of time and that it ought to be possible to reach these planning decisions much more rapidly. If this particular procedure tonight is delayed for any reason, it will add to that delay and must call into question the whole matter of how one handles planning applications of this importance, not only from a political point of view but from the point of view of economic significance. I hope that in deciding this narrow matter tonight, the House will have those wider considerations in mind.
I was summing up by saying that the planning matters were exhaustively considered and that the order that is the subject of the Bill has already been dealt with through the scrutiny of Parliamentary commissioners, including Members of this House. It passed that test. It is on that basis and in accordance with precedent that I am presenting it to the House tonight.

11.27 p.m.

Mr. Roger Moate: The Secretary of State has put the case very reasonably and moderately. He has emphasised the very limited nature of the Bill. However, to be fair to the House, I think that he rather laid emphasis on the intensive and lengthy nature of the public inquiry and failed to tell the House clearly what the conclusions of the reporter were with regard to the planning application. It would be only right for the House to be informed quite clearly that the reporter, very positively, recommended that the three applications submitted by the Ross and Cromarty County Council, for direction under Article 8, and so on, of the Town and Country Planning (General Development) (Scotland) Order, be not granted.
The arguments advanced by the reporter touch very much on many of the questions that have been raised in this debate. Perhaps I could revert to those shortly, because there are a number of general points I want to raise.

Mr. Millan: I am sorry to interrupt the hon. Gentleman. Perhaps I ought to have made one further matter clear. The planning decision has been taken. Nothing that can be done on the Bill tonight will affect that in the slightest. The decision has been taken and these commitments are now entered into. This matter was settled on 1st March 1976.

Mr. Moate: The Secretary of State is right about the planning decision having been taken. However, it would be rather misleading to suggest that the proceedings on the Bill would have no effect whatsoever on the future development of a refinery. The reverse of that case has been put by a number of persons who are concerned that any further delay might jeopardise the project. I have great doubt on that point. If a project


of this nature, with a £200 million investment, is viable, I do not believe that a few more weeks of parliamentary scrutiny could possibly jeopardise it.
I should like to touch on one or two other points raised by the reporter which are very relevant to the Bill. The reporter's report states:
Their motive for taking that action"—
the action compulsorily to acquire the title to this land—
is to be questioned, bearing in mind that they have been offered a 99-year lease of that land should planning permission be granted for the development, the lifespan of which is almost certain to be less than that term.
We are faced tonight with a Bill to confirm a compulsory purchase order on this land. Although we are not now dealing with the petition of Mr. Nightingale—it would have to be dealt with by a Joint Committee—his case is that it is unreasonable for this land to be compulsorily purchased from a British subject—land that has been in the hands of his family, but, more importantly, in the hands of his co-trustees, for centuries—and compulsorily transferred to a foreign company, and more than that, without there being any provision for control over what happens to that land if the oil refinery should not proceed. I would have thought that the Secretary of State should have answered my hon. Friend the Member for Maidstone (Mr. Wells) when he asked about the control of the future use of the land if the refinery does not proceed.
It is relevant to emphasise that I am taking up this case on behalf of Mr. Michael Nightingale whose land in Kent adjoins my constituency—indeed, crosses the boundaries of my constituency. Mr. Michael Nightingale is a man who, in all his dealings in Kent, has shown himself to be immensely concerned with environmental matters. He is trying to retain a leasehold control of this site because he is concerned with the integrity of the Cromarty estate and with the quality of life and the environment of the area. If by any chance the refinery does not proceed—and much of what we have heard tonight casts doubt upon whether it will proceed—I believe it only right that the title of that land should revert to the people from whom it was compulsorily acquired. This is relevant to the matter we are discussing.
Much has been made of the phrase "absentee landlord". While I do not claim to know the intimate details of Mr. Nightingale's affairs, I feel it only right to point out that his family, on his wife's side, have been in that area for many centuries. I also believe that the family of the co-petitioner before the Commissioners—Colonel Ross—have owned the estate for centuries. It is equally true to say that it has not been a very profitable exercise for the landlord because Mr. Nightingale receives no income whatever from that estate at the present time.
Here we have a man who is concerned to maintain the quality of life in that area and who believes, I think rightly, that by retaining the freehold of the property he can help ensure that planning conditions are properly met. I believe that it is a genuine and sincere offer. I do not believe that there are any terms in the 99-year lease—either the rental proposed or the terms and conditions which it embodies—which could be considered unreasonable in any sense of the word. It is fair to remind the House again that the reporter was also of a like opinion. I believe that the previous county council also rejected the compulsory purchase order on those lines.
My initial concern was to ensure that Mr. Nightingale should have the rights available to every other Englishman or Britisher, if that word pleases the Scottish National Party. But as a British Member of Parliament I believe that we should ensure that every individual has all the rights that Parliament has provided for him. In this case my original concern was procedural. I felt it right that when the case was as doubtful as this one seemed to be, and when the man and his co-trustees had offered a 99-year lease, we should press for—

Mrs. Bain: I am most grateful to the hon. Gentleman for giving way. Does he accept that it is right that one individual should be able to block what has been an agreement between the Secretary of State for Scotland and the people involved in the local community? Does he accept that as democracy, because we certainly do not?

Mr. Moate: I do not accept the hon. Lady's description of the circumstances whatever. I only wish we knew exactly


where the Scottish National Party stood on this matter.
I was about to say that I was rather anxious to secure a debate, but when I heard the antics of the hon. Lady and her hon. Friends earlier, which did not seem to contribute anything constructive to the discussion except continual giggling, I wondered whether my object in pressing a debate was as worthwhile as I had originally thought. It seemed to me right that there should be a Second Reading debate and that there should be a Joint Committee of both Houses to consider the matter, and the contributions from both sides of the House tonight have confirmed me in that view.
In the statement sent to all hon. Members by the Parliamentary Agents, Dyson Bell and Company, we are told that this is a rather unusual procedure. Parliament has provided these arrangements for individuals and it is wrong that pressure should be brought to bear on Members not to avail themselves of these rights.
I should like to challenge some parts of the statement by Dyson Bell, because I believe that they are not accurate. There are precedents for this type of action. Bills have been considered by the House in this way in addition to those mentioned. It is misleading to suggest that once a matter has been before the Parliamentary Commissioners, thereafter it is almost improper for the House to consider it further. The legislation has to go through both Houses of Parliament and to suggest that we must simply act as a rubber stamp is insulting. It is even more insulting to suggest that Parliament should simply endorse the actions of the Parliamentary Commissioners.
It has been implied by the Parliamentary Agents that it is an unusual procedure and it has been suggested by many hon. Members off the record that we should not delay matters by discussing the Bill in this way. The hon. Lady the Member for Dunbartonshire, East (Mrs. Bain) thought it wrong that one individual Member should hold up the legislation. This is the way in which each Private Bill proceeds. Someone has to block it. I thought it right in this case for these matters to be aired in Parliament.

Mr. Wells: Does my hon. Friend agree that if the company or its Parliamentary Agents had had the courtesy to make some approach to my constituent, the blocking might have been removed almost immediately?

Mr. Monte: In my view the company should have entered into meaningful negotiations to establish an agreement based on the offer that was made to it, and that can still be done. It could still be done tomorrow if necessary, and so it cannot be argued that these proceedings must hold up the refinery. If the company had had the courtesy to approach me rather than hon. Members putting pressure on me, a procedure I very much resent, we might have had the answers to many of the issues that have been aired and taken up by the Press in the past few weeks.

Mr. Dalyell: Was the hon. Member approached by the public relations firm of Narayn?

Mr. Moate: No. I should have welcomed any approach from the company. I was expecting an approach from the company, and the absence of an approach puzzled me. Perhaps it was not the fault of the company. Perhaps it was the result of bad advice from the company's Parliamentary Agents. There might have been more constructive discussions if the company had put its case and explained some of its reasoning.
It seemed to me—and it still does—that a 99-year lease for an oil-related development was not an unreasonable proposition. There might be minor arguments of detail about environmental considerations, but as we are talking about a £200 million development and if the company is anxious to proceed, I do not believe that it would have allowed the project to be held up by such points.
I said that my concern was procedural. It is to ensure that Mr. Nightingale gets a fair hearing. Since this episode began, other matters have aroused my interest considerably and I think that the House ought to note some of the points that have been made in the Press.
Earlier there was a reference to the financial position of Cromarty Petroleum. I have been sent copies of the company's report and accounts for 1974. It


is stated that in the opinion of the directors the ultimate holding company is the D. K. Ludwig Institute for Cancer Research, which is incorporated in Liberia. The auditors, who presumably thought that factual, are Price Waterhouse. It now appears that the institute is not incorporated in Liberia. According to Mr. Narayn, as reported in The Guardian today, it is registered in Switzerland. It casts some doubt on the certainty of the intentions of the company when we are not even sure in which country it is registered.

Mrs. Bain: Is this situation not perhaps the result of the fact that Daniel K. Ludwig owns property and land throughout the world? I refer the hon. Gentleman to the New York Times of 2nd May 1976 and an article headed:
The expanding empire of a quiet tycoon".

Mr. Moate: I am sure that Mr. Ludwig has vast international interests. I hope that the money will be available and that he will invest it in this site if that is the will of the House. But one must be sure that this is the case. An international organisation, particularly one run by one man, can almost on a whim make a decision about a major investment, but it can also take the opposite decision later. If there is doubt about the likelihood of this development taking place, surely Mr. Nightingale is entitled to ask about the future of the land which is proposed to be compulsorily acquired for him.
I have been sent a further piece of information about Mr. Ludwig and his institute to which the Press has referred in great detail. Apparently, vast amounts of money go to the institute, but a letter from the Imperial Cancer Research Fund, which would, presumably, know about the Institute, says:
Alas, despite enquiries, we have not been able to trace any information concerning the Ludwig Institute. Perhaps the Liberian Embassy ! may be able to help, or, alternatively, the British Embassy, Monrovia.
This must cause doubt about the backers of the project. If permission is to be granted, let us hope that the money will be available, because it will mean jobs. Far be it for me to say what refining policy in this country should be. That is not within the scope of the debate and is far too massive a subject—though it is a matter which this House as a whole or a

Joint Committee of both Houses could examine.

Mr. Dalyell: The hon. Member asserts that it is not for him to deal with oil refining policy in this country, but can one make a rational decision on a beautiful part of Easter Ross without considering it in the light of oil refining policy in this country?

Mr. Moate: That is a fair point. Perhaps I should have said that it was too big a subject to enter into tonight.
However, what is the role of this refinery in the late 1970s and early 1980s when we have a massive surplus of oil refining capacity, when most European refineries are running at 60 per cent. of capacity and are likely to continue doing so for the next decade?
We are not clear about the sources from which the refinery is to secure its supplies. One may say that this fact is not material and that if the investment comes, it will mean jobs, even though it is not working at full capacity. But any increase in oil refining capacity when there is a surplus must undermine investments and job opportunities elsewhere.
I know that my hon. Friend the Member for Ross and Cromarty (Mr. Gray) has been passionately concerned about getting jobs for his constituents, and every hon. Member understands the dilemma of the continuous battle of jobs versus environmental matters. My hon. Friend is obviously concerned to maximise job opportunities in his constituency. He has demonstrated that repeatedly.

Mr. William Ross: As the Secretary of State who made the recommendation, may I ask the hon. Gentleman how many Questions he asked me about it and tell the House that not one Question was asked in the House thereafter?

Mr. Moate: I do not think that the right hon. Gentleman is right to put that question to me. I emphasised that I was taking up a procedural matter. At that time it still had to go before the Parliamentary Commissioners.

Mr. William Ross: The hon. Gentleman is not talking about the procedural matter now. He is talking about matters relating to the inquiry following which I


gave my decision. Following my decision, not a Question was asked by him or any other Member. It would have been relevant.

Mr. Moate: If the right hon. Gentleman wishes to make something out of that he can do so, but, as I have emphasised, my concern derives from a genuine attempt to provide parliamentary opportunity for Mr. Nightingale to put his case in the House. There were many other procedures between the granting of planning permission and the moment of bringing the Bill to the House. The Parliamentary Commissioners had the opportunity to comment, and many other hon. Members who are also expressing their concern presumably did not table parliamentary Questions on this point. When the right hon. Gentleman speaks, he may satisfy us all as to the reasons why he gave planning permission, in which case tonight's debate will have been fully justified.

Mr. William Ross: The hon. Gentleman will appreciate that anything I said would not be relevant to the question of planning permission. We are dealing only with the question of the compulsory purchase of 47 acres.

Mr. Moate: I think that the right hon. Gentleman is wrong, because the reporter at the inquiry commented on nearly all the matters which have been raised tonight. Therefore, the question of the planning application itself is very relevant to the confirmation of the compulsory purchase order on the site.
The petitioners against the Bill are offering a 99-year lease. They do not seek to prevent a refinery from being constructed. If the company is anxious to proceed and is genuine in its desire to proceed, it can negotiate reasonable terms immediately. It is because I believe that to be a reasonable proposition that I think that the House should examine it further. I believe that it is an innately unreasonable proposition that compulsory purchase orders should be given by the House to a foreign corporation which has not satisfactorily proved its credentials to take over land that is British.
I hope that the House will allow time for further consideration of the matter

so that these questions can be answered properly. That is the object of my tabling the blocking amendment. Unless we hear satisfactory answers tonight, we shall have to consider whether the matter should be sent to a Joint Committee.

11.48 p.m.

Mr. Hamish Gray: I would point out to my hon. Friend the Member for Faversham (Mr. Moate) that the greatest environmental hazard and the greatest pollution of all is men at work.
The case has been well made by my hon. Friends the Members for Maidstone (Mr. Wells) and Faversham. All hon. Members will acknowledge that they have spoken up on behalf of the constituent of my hon. Friend the Member for Maidstone, as any of us would in similar circumstances. Unfortunately, there was little new in what they said.
I shall try to spell out why I do not intend to oppose the Bill—indeed, why I intend to support the Government. I have a dual role in that capacity, in that I speak as an Opposition Front Bench spokesman on energy and also as the Member for Ross and Cromarty, the constituency affected.
In order that my twin functions shall not be confused, let me clarify the position of the official Opposition. We shall not oppose this Bill tonight, but we should like to make one or two points in connection with it. In making those points, perhaps I can touch on some of the various matters that have been raised during the debate.
It is a great mistake to suggest that refining policy can be determined at this stage for a long period ahead. Future refining capacity must be very carefully considered. What is a surplus of refining capacity today could easily be a shortage of refining capacity in the 1980s. We have only to look at the situation of oil platform yards. A few years ago there was an outcry for an increase in the number of yards. Today we find ourselves with a surplus, and some of us have great worries about the future of those who have moved into our constituencies and the technology which has been amassed in various centres of Scotland about the future of those yards. It depends to a large extent on future oil discovered. Almost every month


there is news of a new strike. The situation will depend to a great extent on world demand. At the moment, therefore, I believe that we should be very wary about making specific statements, such as the suggestion that we have an excess of refining capacity.
I move on to the question of the proposed refinery at Nigg Bay. It will be an independent refinery. This is something that is not common in the United Kingdom or, indeed, in Europe at the present time. I am not surprised to hear the major oil companies express the view that we have an excess of oil refining capacity and there is no need for more refineries at the moment, because the major oil companies control the capacity and it would not be natural for them to say other than that we should not have an independent refinery at the moment, for that would introduce an element of competition. While they control the refining capacity they are also in control of the independents.
Therefore, I believe that the whole aspect of our independent refinery is a good thing. I believe there is a strong case for encouraging competition. After all, surely we on the Opposition Benches believe in free enterprise. This is an element of free enterprise, and I would be surprised if my hon. Friends were to disagree about it too strongly.
Furthermore, the plant connected with the new refinery will be oriented towards petrochemical feedstock. It is declared Government policy that two-thirds of this shall be processed in the United Kingdom. I take issue with those who have suggested an excess of refining capacity, and I refer them to the statement made last week by the organisers of the Offshore Europe Exhibition 1977, which is to take place at Aberdeen. They estimate that £1,100 million of investment in petrochemical plants and refineries is likely to take place in Scotland by the early 1980's.
In an article in the Glasgow Herald, dated 29th July, this is confirmed. A staff reporter writes:
Investment in petrochemical plants and refineries in Scotland is likely to total £1100 million by the early 1980s, it was forecast yesterday by the organisers of he Offshore Europe Exhibition 1977.
We cannot put too much emphasis on the view that at present there is an excess

of refining capacity. The oil scene and the requirements of the oil industry vary from year to year. It would be a brave man who would go so far as to make a conclusive prediction for the years ahead.
I reiterate what the Secretary of State said, namely, that the Ross and Cromarty refinery has been fully considered already by Parliamentary Commissioners. The question whether the company should be given the right to acquire the 47 acres in addition to the 800 acres already in its possession has been carefully considered. Two whole days were spent considering the objections of the landowner in that regard. I know that my hon. Friend the Member for Fife, East (Sir J. Gilmour) was concerned about the whole matter and gave it a great deal of thought. I have since discussed the case with him and received his assurance that the Parliamentary Commissioners were convinced on that point.
So much for the views that I have expressed from the Opposition Front Bench. Although I shall not move physically, I shall now deal with the situation from the position of the Member who represents Ross and Cromarty. The Cromarty Petroleum Company has acquired the 800 acres on which to construct marine terminal facilities, a refinery and associated storage facilities, mostly underground. The scheme will cost approximately £150 million. Some questions were raised at great speed by the hon. Member for Dunbartonshire, East (Mrs. Bain), and I was not able to catch them all. There will be 1,500 jobs during the three years of construction of the refinery. When it is completed there will be approximately 450 permanent jobs. We must consider the spin-off that such a development is liable to create.
The refinery will deal not only with North Sea crude but with crude from the heavier end of the barrel. It will deal with crude from the Gulf as well. We are all aware that our own oil from the North Sea, on its own, requires mix, and the mix will come from the Gulf.
I move on to the question of the 47½ acres. The negotiations that have been carried on over nearly three years have been inconclusive. The landowner claims that he has offered a 99-year lease, while the company says that the conditions


have never been set out and that such is the position of the landowner that there would simply not be any likelihood of the two sides reaching agreement.
I have been given a file of the correspondence that has taken place between the landowner and the various representatives of the company. The file is quite revealing. It starts on 11th December 1973, when Mr. Greene, of Macrobert, Son and Hutchison, solicitors of Glasgow, wrote to Mr. Nightingale. The second paragraph attracted my particular attention. It stated:
Our clients have taken note of your enquiry on the subject of possible participation in the Company which will construct and operate the proposed development.
That seems rather strange for someone who was basically so opposed to the whole concept of the development of a refinery.
On 11th January, in reply to that letter, Mr. Nightingale wrote:
You have said nothing further about my possible wish to participate in any project that goes forward.
Mr. Nightingale may well have wished to participate in such a company in order that—

Mr. Wells: Surely correspondence between a solicitor and his client is privileged.

Mr. Gray: In view of what they have said in this debate, my hon. Friends should be the last people to question privilege in this House.

Mr. Wells: My hon. Friend has not answered the question.

Mr. Gray: The points that I have made are perfectly straightforward. My hon. Friends are at liberty to see any of the correspondence to which I have referred. Mr. Nightingale may well have wished to participate so that he might effectively control the development of the project, but nevertheless he was pre-prepared to participate, so he surely could not have been all that much against the project.

Mr. Moate: Is it not clear from the fact that the petitioner has offered a 99-year lease in good faith that he is not now opposing the refinery, even

though he and many hundreds of others objected originally at the planning inquiry? My hon. Friend may be right in quoting correspondence of this nature, but are not these the sort of points that are normally examined in a Private Bill Committee?

Mr. Gray: These are points that I am entitled to make on Second Reading. You, Mr. Deputy Speaker, have not seen fit to rule me out of order, and I am prepared to go by your ruling and judgment.

Dr. Alan Glyn: Does my hon. Friend have the permission of the so-called solicitor or WS to reveal this correspondence—or the consent of the owner of the land? I share the view that it is questionable whether these letters should be quoted in the House.

Mr. Gray: I disagree with my hon. Friend.
I now move on to the question of the 47 acres, and the subject of the Parliamentary Commissioners. As I said, the inquiry took place on 3rd and 4th May and was devoted entirely to the objections of the proprietor. Probably no refinery or similar project has been the subject of such detailed and comprehensive planning conditions. In all, 51 were laid down by the Secretary of State in his decision letter of 1st March, and there were also the rulings of the local planning authority.
This project is wholly supported by the Highlands Regional Council and by the Cromarty Firth Port Authority.

Mr. Dalyell: Has the council or the authority gone into the finances of the company—the £150 million, or, as we understand, £200 million? If the hon. Member says that the council has satisfied itself on the point, or that he has satisfied himself, that will obviously weigh with the House.

Mr. Gray: I am grateful to the hon. Member; I am coming to that very point Like other hon. Members, if I am going to lend my support to something in the House, I want to make sure that what I am supporting is a viable proposition. I did just that. This afternoon I made exhaustive inquiries about the whole setup of the Cromarty Petroleum Company.
I can tell the House that the Cromarty Petroleum Company is owned 100 per cent. by Universe Tankships, of Liberia, the main operating company under which Mr. Ludwig operates. In turn that company is owned by the Ludwig Institute for Cancer Research in Switzerland, which also operates in London. In London it is controlled by a distinguished committee and is registered both as a charity and as a corporation in research. I have no further information than hon. Members about the operation of the company, but if the Ludwig organisation were to go to any American bank for a credit rating I can assure the House that it would have a rating financially as high as that of many of the major oil companies.
I have no doubt that this company is well able to finance the project. I am prepared to welcome an investment of between £150 million and £170 million in Ross and Cromarty, bearing in mind the jobs it will produce and the off-spin that will arise.

Mr. Buchan: Leaving aside the richness of Mr. Ludwig—I believe that he was Howard Hughes' last landlord—can the hon. Gentleman say how much Government money will be involved in supporting a project of this kind? Would it not be better to go the whole hog and make it a publicly-owned refinery?

Mr. Gray: I understand that Lord Kearton, the Chairman of the British National Oil Corporation, has indicated that he is not interested in BNOC taking over, but he already has an interest in BP and therefore has no need for further refining capacity. It is estimated that Government involvement will amount to between £30 million and £40 million.

Mr. Robert Cooke: May we be told the names of some of the distinguished people who head this cancer trust?

Mr. Gray: It is chaired by Lady Compton, and includes Lord Halsbury and Professor G. A. Smart.

Mr. Bob Cryer: Will the hon. Gentleman explain the function of the committee? Will it have executive control over the development of the refinery, and will it allocate profits to cancer research?

Mr. Gray: No. I shall not fall for that line of questioning again. The committee operates the cancer research aspect in this country.
I was curious about the interest expressed by the hon. Member for West Lothian (Mr. Dalyell) and, since he is keen on asking direct questions, I put to him—has he been lobbied by BP on this subject?

Mr. Dalyell: I thought it my duty to contact BP. I have close relationships with the company on many subjects. Yes, of course, I contacted BP.

Mr. Gray: I am grateful for that answer. I thought that might have been the case. In conclusion—

Mr. Russell Johnston: Can the hon. Member say anything about the interesting, tenuous links in the past between Dr. Jenkins and Grampian Chemicals?

Mr. Gray: I am grateful to the hon. Gentleman, because I had intended to deal with that matter. It had worried me, and I had an assurance that there was no connection whatever between the former Grampian Chemicals and the present company. I specifically asked whether Mr. Eoin Michie, formerly of Grampian Chemicals, had anything to do with this company, and I was given the assurance that he had nothing to do with it.
My view is perhaps coloured, because—

Mr. Andrew Welsh: Who gave the hon. Gentleman those assurances?

Mr. Gray: I had them from the company. I went straight to the fountain-head for the answers, and I was given the assurance about Mr. Michie by the controlling executive, Dr. Jenkins.

Mr. Buchan: He was tied up in the other company, too.

Mr. Gray: Nobody has tried to disguise this. The key figure in the Grampian Chemical Company previously was Mr. Michie. He was the figure in whom I was particularly interested. I should not have agreed to support the project unless I had been satisfied that those running it were of repute.
I remember the Highlands when we had a great deal of unemployment, and when those who graduated or who wanted to improve their lot had to move South. I see a prosperity in the Highlands today which 10 years ago I should not have dreamt of. I see today streets in my constituency with new shop fronts where before shops lay empty. I see today in the constituency a place to which many people want to return—a complete reversal of the position a few years ago. I suggest to my hon. Friends the Members for Faversham and Maidstone, with all due respect, that if they try to delay the Bill they are putting all that at risk. It is important that the Bill is given its Second Reading and is allowed to proceed. My hon. Friends should think very carefully before trying to block the Bill any further.
Tonight's debate has been of advantage. It has cleared the air and has allowed everybody to participate. There has been no undue delay in the debate, but I hope that my hon. Friends will now allow the Bill to proceed.

12.13 a.m.

Sir John Rodgers: I had had no intention of intervening in the debate. My presence was merely because I was interested in the search for jobs for Scotland. About 20 years ago I spent several years trying to direct industry into Scotland. Most of the major projects then were American investments, not British.
As two other Kentish Members—my hon. Friends the Members for Maidstone (Mr. Wells) and Faversham (Mr. Moate) —have intervened, I feel that I may intervene as the Member for Sevenoaks, particularly as Dr. Jenkins apparently resides at Sevenoaks. I have never met him, but I have corresponded with him.
My hon. Friend the Member for Ross and Cromarty (Mr. Gray) has hit the nail on the head. There has been the most exhaustive public inquiry into the project. It has been referred to Parliamentary Commissioners, who have approved it. Scotland needs new investment and development. Here is an opportunity.
The only point that has been raised in the whole debate is whether a company that has already acquired about 800 acres for development should be held up by a Mr. Nightingale, whom I have never met

but who I am sure is an honourable man. I am glad that his Member has looked after his interests and put his case fairly tonight. The question is whether that man, with his 47 acres, can hold up this project when the bulk of the land has already been acquired.
My hon. Friend the Member for Maidstone was entitled to argue that Mr. Nightingale had been very fair. My hon. Friend pointed out that Mr. Nightingale owned the land, did not wish to sell it, but was willing to let it go on a 99-year lease. I had some sympathy with my hon. Friend the Member for Faversham, who said that if the project did not go ahead there might be a reason for including a clause to the effect that Mr. Nightingale could repurchase the land for the price he paid for it. However, the idea of a 99-year lease is ridiculous when one has in mind the fact that the project involves a £200 million development. If the project is set up, surely such a suggestion will mean that a pistol could be held at the head of the company. No business man would go ahead on the basis of such a suggestion.

Mr. Moate: My hon. Friend makes a helpful suggestion, but will he suggest the best way in which one could proceed to draft an amendment to that effect?

Sir J. Rodgers: I cannot. I leave that to the right hon. Gentleman the Secretary of State for Scotland. I hope that the House will agree to give the Bill a Second Reading and will reject the second motion.

Question put and agreed to.

Bill accordingly read a Second time.

12.17 a.m.

Mr. Wells: I beg to move,
That the Bill be referred to a Joint Committee
We have been over all the arguments and my hon. Friend the Member for Sevenoaks (Sir J. Rodgers), who represents the managing director of the other side, in a short intervention summed up what we and Mr. Nightingale's friends have been trying to put over, namely, that Mr. Nightingale should have some opportunity of redress. We do not care particularly what kind of redress, provided that he is afforded some opportunity to be considered if a refinery is not built.

Mr. Fairbairn: I have listened to many debates in which it has been claimed by Labour Members that the Scottish Development Agency and the National Enterprise Board have as part of their function the duty of restoring to its original purpose land taken over for an industrial purpose and when they have referred to what happens when that purpose ceases to be relevant. I should like to have some commitment from the Government to the effect that if this land is not used, such restoration will be made without the need for compensation.

Mr. Wells: I am grateful to my hon. and learned Friend for that intervention. If the high hopes of the project are dashed to the ground, every reasonable man will expect Mr. Nightingale to have some protection. I see a Joint Committee as the only way by which this can be done, but if the Secretary of State can offer some alternative procedural mechanism by which Mr. Nightingale can be protected, I shall be glad to withdraw the motion.

12.20 a.m.

Mr. Millan: Perhaps I can help the House by explaining the position. There is power, under the 1936 Act, to refer the matter to a Joint Committee. This would, once again, involve the calling of witnesses, the employment of counsel, and a repetition of the arguments that have already been put before the Parliamentary Commissioners. The matter has already been gone into. The issues that the hon. Member for Maidstone (Mr. Wells) has raised were no doubt raised before the Parliamentary Commissioners. If they were not, there was no good reason why they were not.
The matters concerned have already been considered and we have now got the Bill before the House. As to whether it is desirable to refer the matter to a Joint Committee I can do no better than quote a former Lord Advocate, now Lord Wheatley, who said in a debate on a similar motion in 1950:
'I think that, from the point of view of the procedure of the House, the House would be slow to give effect to any such Motion unless they were satisfied, prima facie, on the case presented that some large and important constitutional issue was raised, or that some material miscarriage of justice had been effected; and that they would not sanction the repetition of the previous procedure and a rehearsing of the case unless conditions such as I have indicated

were satisfied."—[Official Report, 20th July 1950; Vol. 477, c. 2562.]
It is for the House to make a decision on this matter but I am not aware that tonight there has been raised an important constitutional issue or the question of a material miscarriage of justice.
The last time—[Interruption.] My hon. Friend the Member for Keighley (Mr. Cryer) is intervening from a sedentary position, but not with any great relevance.

Mr. Cryer: I do not mind intervening from a vertical position. There is quite an important matter involved here. Here is an organisation which, so far as we are aware, bears not the slightest relationship to the usual company formation, but to which the Government are proposing to give support and encouragement in an important area. I have not yet heard any good reason why the company should be given this approval.

Mr. Millan: With respect, the Government have not done anything more than carry out the formal duty, which I hoped I had explained at considerable length, of bringing the Bill before the House. The House—not the Government—has given the Bill a Second Reading without dissent.
We are now concerned with the question whether we should import into this matter the delay which the establishment of a Joint Committee would involve. As I have said, if we were to do that we would, as far as I can see, be acting against what has been the normal procedure. I was going on to say that the last occasion when, following this procedure, there was a reference to a Joint Committee happened in the early years of the present century. On that occasion—there were special reasons—the Joint Committee reaffirmed the decision of the original Parliamentary Commissioners. On the question of precedent we would have to go a long way back before we could follow this recommendation tonight. As things stand, although this is a matter for the House to decide, I do not think that the case for reference to a Joint Committee has been made out.

12.23 a.m.

Mr. Moate: I must confess, again, to having been disappointed with the response of the Secretary of State. I had hoped that he would reply constructively


to the sensible suggestion made by my hon. Friend the Member for Sevenoaks (Sir J. Rodgers) that an extra duty should be imported into the Bill to ensure that there is proper control over the future of this land if by any chance this project should not proceed. The only way that that can be done, as I see it, is by having a Joint Committee to examine the matter.
The Secretary of State says that he does not think that a case has been made out. That is for the House to judge. I would have thought that enough matters of importance had been raised tonight to justify setting up a Joint Committee. I am sure that the right hon. Gentleman is correct in saying that the last time a Joint Committee was set up was many years ago. That does not mean that the House has not considered such propositions more recently. I do not have the reference but I believe that the House considered such an issue as recently as 1970. On that occasion, presumably the House decided not to refer it to a Joint Committee.
It is also suggested that we should be duplicating matters that had already been covered by the Parliamentary Commissioners. Far be it from me to delve too deeply into the complexities of Scottish private legislation procedures, but, as I understand it, the philosophy of having Parliamentary Commissioners is to provide for the convenience not of Parliament but of petitioners, so that they do not have to travel to London but can be heard in Edinburgh. It is a sensible procedure to ensure that compromises can be reached and matters settled without having to have recourse to Parliament. But if the petitioners wish to bring their case to Parliament, if they have not been satisfied by the proceedings before the Parliamentary Commissioner, they should have the right to take advantage of the procedures laid down

by Parliament for them to be heard once more.

I think that the case has been made out, and I hope that the House will decide to appoint a Joint Committee and to refer this matter to it so that it can be dealt with as speedily as possible. If it is dealt with speedily, I do not think that any arguments can be made about unnecessary delay, holding up the project or jeopardising a project which, in the end, must stand on its own feet. If it is a viable project, it will not be jeopardised by a few weeks' further delay.

I hope that the House will send this Bill to a Joint Committee for proper scrutiny.

12.26 a.m.

Mr. Fairbairn: I do not wish to speak for one side or the other, but it is important to Parliament that tonight we have considered a matter of immense moment for the development of an area in Scotland that will either promote employment or ruin the area. We have discussed whether the company in question is valid, but we have also demonstrated that the process by which such an important decision is taken is really invalid.
Parliament is now not really capable of making an important decision of so momentous a kind on a procedure of this nature. I think we should reconsider very carefully the procedure by which such an important decision is taken. Whether my hon. Friend the Member for Ross and Cromarty (Mr. Gray) or anyone else is right, we are taking a major decision on a whim of procedure. I think that that procedure is wrong and that we should have a better procedure in future.

Question put:—

The House divided: Ayes 9, Noes 68.

Division No. 308.]
AYES
[12.30 a.m.


Cryer, Bob
King, Tom (Bridgwater)
Skinner, Dennis


Dalyell, Tam
Marshall, Jim (Leicester S)
TELLERS FOR THE AYES:


Glyn, Dr Alan
Moate, Roger
Mr. Marcus Kimball and


Kerr, Russell
Rooker, J. W.
Mr. John Wells.




NOES


Armstrong, Ernest
Brown, Hugh D. (Provan)
Cox, Thomas (Tooting)


Bain, Mrs Margaret
Buchanan, Richard
Craigen, J. M. (Maryhill)


Bates, Alf
Buchanan-Smith, Alick
Crowder, F. P.


Beith, A. J.
Cocks, Michael (Bristol S)
Cunningham, Dr J. (Whiten)


Biffen, John
Cook, Robin F. (Edin C)
Davies, Rt Hon J. (Knutsford)




Dempsey, James
Jopling, Michael
Rowlands, Ted


Douglas-Hamilton, Lord James
Kitson, Sir Timothy
Small, William


Douglas-Mann, Bruce
Knox, David
Smith, John (N Lanarkshire)


Durant, Tony
MacGregor, John
Snape, Peter


Eadie, Alex
MacKenzie, Gregor
Stallard, A. W.


English, Michael
Maclennan, Robert
Steel, David (Roxburgh)


Ewing, Harry (Stirling)
McMillan, Tom (Glasgow C)
Stewart, Donald (Western Isles)


Fletcher, Ted (Darlington)
Mahon, Simon
Stott, Roger


Garrett, W. E. (Wallsend)
Marshall, Jim (Leicester S)
Tinn, James


George, Bruce
Millan, Bruce
Walker, Terry (Kingswood)


Gilmour, Sir John (East Fife)
Oakes, Gordon
Welsh, Andrew


Gow, Ian (Eastbourne)
Palmer, Arthur
White, James (Pollok)


Gray, Hamish
Parry, Robert
Winterton, Nicholas


Hamilton, James (Bothwell)
Penhaligon, David
Woof, Robert


Harrison, Walter (Wakefield)
Reid, George
Wrigglesworth, Ian


Hicks, Robert
Roderick, Caerwyn



Hordern, Peter
Rodgers, Sir John (Sevenoaks)
TELLERS FOR THE NOES:


Hunter, Adam
Ross, Stephen (Isle of Wight)
Mr. Russell Fairgrieve and


Johnston, Russell (Inverness)
Ross, Rt Hon W. (Kilmarnock)
Mr. Ian Campbell.

Question accordingly negatived.

Bill to be considered this day.

ALCOHOLICS (COMMUNITY SERVICES)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. James Hamilton.]

12.38 a.m.

Mr. Robin F. Cook: I am most grateful for the opportunity of this Adjournment debate to raise a matter that is of very great concern in Scotland, at what is, I suppose, an appropriate hour to be considering the problems of alcoholism. Certainly we consider these at an appropriate moment in the Session, because only last week the House considered and passed a Bill to reform licensing laws in Scotland—a Bill that will provide for considerably longer drinking hours than hitherto.
As my hon. Friend the Under-Secretary is aware, there are two views about the effect of that reform. There are some who fear—as I do, and as I think he does—that the decision to open public houses on Sundays may lead to an increase in the problem of alcoholism that we face in Scotland. However, I think that my hon. Friend will agree that one point that marked the debate we had both on the Floor of the House last week and in Committee was that on both sides there was a general agreement that whatever the likely effect of opening public houses on Sundays, there was a very strong case for more resources to be made available to fight the problem of alcoholism in Scotland.
It is hardly suprising that we find this consensus on the need to take further

action to fight alcoholism in Scotland, because we have a frightening problem at present. I speak with a particular constituency interest in the matter, because I have in my constituency the Grass-market, which contains not only nearly all the lodging-houses in Edinburgh but one-third of all the lodging-house beds in Scotland.
While the single homeless person is not typical of the average alcoholic, nevertheless there is no doubt that the loss of family and the loss of home is associated with severe alcoholism. We can see in the Grassmarket many of the consequences brought about by this dreadful problem.
We have at the present time an admission rate to hospitals in Scotland seven times as high as the admission rate of alcoholics in England and Wales. We have a rate of offences connected with drunkenness in Scotland four times as high as the comparable rate for England and Wales. Indeed, one in three of all convictions for offences involving drunkenness are in Scotland, an area with only one-tenth of the population of the United Kingdom. Not only do we have this already serious imbalance; the problem has got worse. Admissions to hospitals for alcoholism have doubled in Scotland in the past decade and convictions for offences involving drunkenness have doubled in Edinburgh over the last 15 years. Indeed, convictions are now running at a rate of one in 100 of the population, a remarkable figure. As my hon. Friend is well aware, the most depressing feature of this trend has been that more and more young people and more and more women are involved in the problem of alcoholic abuse, and are reported as having alcoholism as a diagnosed diseases.
Clearly the problem that we face in Scotland with regard to alcoholism is really a mountain. I am bound to say that the Government's response hitherto has been something of a mouse by comparison. I have in mind, in particular, Circular 4/76, issued by the Social Work Services Group in March of this year, which I shall deal with in some detail. Before doing so I think it is worth putting on record that this circular certainly was long awaited. The comparable circular for England and Wales came out in 1973, over three years ago.
The Minister is perhaps aware that this debate is taking place, by coincidence, almost to the day of the second anniversary when I wrote to the hon. Member for Aberdeen, North (Mr. Hughes), then Minister responsible, asking when we could expect publication of this circular, which did not come out until four months ago. In addition to that delay there was a further year's delay between the production of the draft circular in April 1975 and the production of the completed circular in March this year. It is very difficult to understand the reason for this delay because so far as I am aware none of the voluntary organisations that submitted comments on that draft circular, nearly all critical, had any of their recommendations accepted and incorporated into the final draft that was produced.
I find it striking that the Clayson Report was also presented in 1973 and that in the three years since then we have managed to find the time to prepare proposals based on that Report, and to draft a Bill based on those proposals and pass it through this House quite properly and correctly. Yet, in the same length of time, with regard to community services for alcoholics, we have found time only to draft and produce a single circular.
Nor is it easy to understand why three years were taken for the production of this distilled masterpiece of departmental wisdom. If we compare the circular with the English circular produced three years ago we find no significant new recommendations, although we find some significant omissions, to which I shall refer. I am reluctant to believe that the Department spent three years deciding what to leave out of the English circular. The tragedy is that this delay means that

we are discussing the circular produced in 1976 in a very different climate of opinion about public expenditure. In its very first statement the circular points out that
Present and prospective constraints on the availability of resources for the development of local authority services in general mean that development of community services for alcoholics must for the foreseeable future be confined to measures which would involve little or no additional expenditure;
That is a most forceful statement in what remains a notably rapid document. The irony is that it looks as though we shall have a situation in which less money is allocated to community services to fight alcoholism in Scotland, which is the area of the country in which we have the greatest incidence of the problem.
One particular contrast that I should like to make is in relation to residential hostels for the alcoholic. My hon. Friend will be aware that the circular produced by the Department of the Environment provides capital and revenue grants for the creation and support of residential hostels for alcoholics, but no such grant is incorporated into the circular issued by the Scottish Office this year. He will be aware that those who work in this field attach considerable priority to the development of proper residential accommodation for the alcoholic. At present the provision in Scotland is, as I am sure he will concede, grossly inadequate. The number of residential hostels for the alcoholic in Scotland is still in single figures, and only one of them is local authority-run. I am happy to inform the House that that is situated in my constituency, in which, as I have already said, are most of the lodging houses and hostels in the South-East of Scotland.
My hon. Friend may have seen in his office a report produced by the local work team which handles that hostel and which makes a very compelling case for this type of provision and its expansion by other local authorities. The experimental work has already been done and the conclusions from the work written up, and they are available to every local authority. There is everything to be said for making resources available for an expansion of this work.
I should like similarly to refer to the need for detoxification centres. A whole


paragraph in the circular issued by the Department of the Environment is given over to warmly commending the development of such centres, and there are now three such centres in operation or approved in England and Wales. But there is no mention of detoxification centres in the circular issued this year. The irony is that not only do we not now have a detoxification centre in the whole of Scotland, but the only one that was in operation came to an end last year as it came to the end of the funds set aside for the experimental period.
I can understand the Scottish Office taking the view that this was experimental work funded for an experimental period until conclusions on the work could be made known, but, as my hon. Friend is probably aware, the report of the doctor in charge of the unit has now been published and is available to his Department. It shows striking success in dealing with those who are habitually taken to court and charged with drunken offences. There is a considerable success rate, and that makes an encouraging case for the development of such centres on a permanent basis and in places other than just Edinburgh. Once again, the circular of March this year is silent on this subject.
Lack of a positive recommendation in these respects casts some doubt on the other recommendations in the circular. In paragraph 6 there is a section on information centres. The circular warmly commends the development of information centres so that local authorities and voluntary organisations may explain what provision there is for the alcoholic and what facilities he can receive for treatment. But that suggestion is made against a background in which no such facilities are available.
What is the information centre to tell the individual alcoholic who goes for treatment—that there are only half a dozen residential hostels and no detoxification centre? The whole point of making additional information available is that is should be backed up by proper facilties and adequate services to treat the disease.
Much the same comments may be made of the present campaign being waged by the Scottish Health Education Unit, an admirable campaign, which I

strongly support. It can make sense only if people who come forward, having diagnosed themselves as having an alcoholic problem, find that there are adequate facilities for treatment.
I suspect that the authors of the circular are acutely aware of the lack of concrete recommendations in it. Its language is particularly flaccid in that local authorities are not told that they should do something but are merely told that they may. There is nothing to oblige local authorities to do anything in particular.
I recognise, since there was no covering letter with the circular, that there is no requirement for local authorities to sunbmit to the Scottish Office their proposals for community facilities. When the Government issue a circular which they intend to be taken seriously—for instance, on public expenditure—there is a requirement for local authorities to respond. There is no such requirement in this circular.

Mr. Tam Dalyell: My hon. Friend the Under-Secretary of State for Energy—the hon. Member for Midlothian (Mr. Eadie)—is here. I am sure that he would agree that in our constituencies local authorities have taken this problem seriously and done quite a lot over a number of years.

Mr. Cook: I was speaking generally about Scottish local authorities. I appreciate that there are authorities which recognise the problem and respond positively.
Even in Edinburgh, the work done in the Grassmarket urban aid programme in the last few years has been striking and will be of considerable importance for the rest of Scotland if adequate resources are made available for an extension of similar facilities in other urban centres.
I recognise that this debate takes place after a serious debate on public expenditure cuts, and that a voice raised for further public expenditure is perhaps not particularly welcome on the Government Front Bench.
I would reply in two ways. First, considerable work could be done which is not primarily financial. There is a serious need to look at the training of social workers and others to ensure that proper methods of diagnosis and treatment of


alcoholism are included in courses. I understand that in the present two-year course for social workers, there is only half an hour's tuition on the problem of alcoholism. This is clearly imbalanced, and the solution does not depend on additional finance.
The Government could also consider following the example of the Department of the Environment and set up an alcoholism advisory committee. Such a body is already operating in England and Wales and has made recommendations of considerable importance for the time when public expenditure is not under the same constraints and local authorities are better able to meet this problem. Clearly there is a great need for a similar committee in Scotland, where the problem is much more severe.
Secondly, I cannot accept that constraints in public expenditure are conclusive, especially when we consider the grave problems resulting from alcoholism and particularly when it is associated in the minds of many people with the drinks trade, which is exceedingly profitable. Many people understandably find it distasteful to be told that the money is not there to provide additional facilities for fighting alcoholism when they see how much money is being made from the sale of drinks.
The Government also have done very well out of the sale of drinks. Over the past decade, the amount of alcohol sold in Britain has nearly doubled, and that has meant a considerable increase in Government revenue. If only 1 per cent. of that revenue were devoted to fighting alcoholism it would transform primary and secondary care. This is precisely the approach adopted in Scandinavia. In Sweden, a surprisingly high 10 per cent. of all revenue from the sale of alcohol goes to providing treatment and facilities for alcoholics.
Moreover, alcoholism costs society very dearly. It has been estimated that the cost to the industrial sector in Scotland alone is £35 million a year—a very high figure. There is a particular cost to public expenditure on social services, because alcoholism is often associated with family breakdown and the cost of taking children into care, with people becoming homeless and with battered

wives. In addition, many regular offenders are frequently sent to prison.
My hon. Friend will know that over a year ago, in the debate on Report of the District Courts (Scotland) Bill, I pointed out the serious cost to the community of treating the alcoholic offender—the drunken offender—by imprisoning him for non-payment of fine. That point has been made in the House time and time again. I am indebted to a recent article in The Guardian for pointing out that as long ago as 1872 a prison governor told a Select Committee that in his view imprisonment was by no means a helpful way of treating an alcoholic and that more positive ways should be found.
The absurdity is that the practice of taking the alcoholic offender to court. convicting him, fining him and then imprisoning him for non-payment of the fine is about the most expensive way of coping with the problem, as well as being the least effective. The provision of residential hostels would not be only a more successful way of coping with the problem; it would also be far cheaper.
In conclusion. I return to where I began. If the House can find the time, quite properly, to consider a reform of Scotland's licensing laws, the workers who are associated in this field and have daily to work with the alcoholic problem and see the cost to society and individuals of the present high consumption of alcohol will think lightly of us—and they will have some legitimate criticism of us—if we cannot also find the minimal resources required to provide adequate facilities for coping with and treating the problem of alcoholism that may flow from that same reform in the licensing laws.

12.57 a.m.

The Under-Secretary of State for Scotland (Mr. Harry Ewing): I am grateful to my hon. Friend the Member for Edinburgh, Central (Mr. Cook) for raising this question on the Adjournment this morning. It is worthy of note that I am joined on the Front Bench by my hon. Friend the Member for Midlothian (Mr. Eadie), who is Under-Secretary of State for Energy and who, during his period on the Back Benches, showed a great interest in the subject of alcoholism and raised an Adjournment debate on the subject. My hon. Friend the Member


for West Lothian (Mr. Dalyell), too, is, like myself, deeply interested in the subject.
This seems like the morning after the night before, for last week—almost at this time—we were reforming Scotland's licensing laws. This week we are, to a great extent, discussing the consequences of the action that we took last week. The consequences are very serious. I am not sure that I shall be able to say much by way of encouragement to my hon. Friend the Member for Edinburgh, Central in respect of the availability of resources to deal with this very serious problem.
In dealing with the problem of alcoholism we seek to break what has been loosely described as the "Skid Row cycle". There is not only a very great cost in financial terms—my hon. Friend mentioned the estimated cost to Scotland's industry of £35 million—but there is probably the even greater cost in human suffering—the marital disputes and child care problems that flow from alcoholism. These are only too familiar to local authority social work departments.
Much still remains to be learned about the cause and treatment of alcoholism, but a great deal has been done in recent years in relation to both prevention and treatment. The prevention of alcohol dependence requires not only increased awareness by the public of the risks of the misuse of alcohol but also recognition that alcohol is a disease that can be treated. This has been one of the greatest developments in recent years. For the first time, largely through the activities of the Scottish Health Education Unit and the massive publicity campaign that has been entered upon, we are now able to encourage people to recognise that they have a drink problem and to accept that that illness can be treated, and therefore to come forward and accept treatment.
There is no doubt that the experiment that has been run in my hon. Friend's own constituency has contributed a great deal to the knowledge that we now have of the causes and treatment of alcoholism. As I say, one of the greatest steps forward has been the fact that we have been able to encourage alcoholics to recognise that they have this problem and that they can obtain treatment.
I could not help noticing that my hon. Friend did not, as he did when the Clay-son Committee Report was considered, deal with the question of advertising. I believe—we are seeking to convey this impression to those responsible for advertising—that advertising has a great deal to do with the attitude that people adopt to alcoholics. I am particularly pleased that the Independent Broadcasting Authority has imposed new safeguards and standards in relation to advertising alcohol, and it is stipulating that these advertisements must not be directed to young people.
I still believe that a great deal remains to be done about advertising. I often say that if only advertising companies would not make it appear to be glamorous, or a test of a person's virility, to be able to drink limitless amounts of alcohol, I am sure that some—I do not say a great many—of the problems that we have with alcohol and the alcoholic would not be with us. I hope that those who are responsible for advertising will read my words carefully and will see what more can be done to tighten up standards and safeguards relating to advertising.
Coming to the question of what further can be done, I know that for however long a period I happen to be in this job, when I leave it I shall do so with a sense of not having done as much as I would have liked to do to deal with this question of alcoholism. The health services, the local government social work services and voluntary bodies working in alcoholism all have a part to play in combating these problems.
I wish to emphasise the part that the voluntary bodies can play. In these times of financial stringency and economic stress—indeed, if we were not experiencing financial stringency and economic stress I would make this point just as forcibly—I honestly believe that it is to the benefit of the community that we should encourage the voluntary bodies to do everything humanly possible to help us deal with this vexed question. I hope that the question of encouraging the voluntary bodies will be given particular attention in the months ahead.
In Scotland at the moment there are five hospitals with specialised units for the treatment of alcoholism, and there are 13 other psychiatric units in general hospitals which have a special interest in


alcoholism. These are all steps that have been taken in the last few years. Some patients suffering from alcoholism are admitted to hospital as in-patients. My hon. Friend knows the difficulties for those who are referred to hospitals, and how the number has risen dramatically and tragically over the past few years. There are other patients who are treated as out-patients or day-patients.
The initial approach to the health service of a person suffering from alcoholism is likely to be to the family doctor. That brings me to the circular on which my hon. Friend based most of his remarks. The local authority social work departments, as I have said, have an important role to play in the provision of the services in the community for alcoholics. The Social Work Services Group of the Scottish Education Department issued broad guidance in a circular on the subject a few months ago. It was in March of this year that the circular went to health boards and to appropriate voluntary bodies.
Alcohol abuse has many aspects, and no single body or provision can be responsible for solving the problem, but if all concerned could plan jointly more progress could be made. In planning community services for alcoholics we must remember that there is no single model of practice and that each locality, with its particular circumstances and resources, must plan services according to its own needs. The circular stresses the need for the setting up of planning liaison committees. That is one of the positive aspects of the circular. The committees are seen as useful vehicles for statutory

and voluntary bodies to get together and develop local policies.
At national level there is the Programme Planning Group on Mental Disorder, which was set up jointly by the Scottish Health Service Planning Council and the Advisory Council on Social Work in 1975 to advise them on the provision of health and social services for the mentally disordered. The group is expected to include consideration of the needs of alcoholics in its future deliberations.
Much valuable work on the care of alcoholics in the community is being done by the Scottish Council on Alcoholism—a body set up and run with the help of Exchequer grant. It has the broad aim of promoting and encouraging all aspects of the campaign against alcoholism. The council, with its local councils, provides information and advisory services for people with personal drinking problems and for members of their families. It is important to remember that very often it is not only the alcoholics who have a major problem but the members of their families. It is for that reason that the information and advisory services are available.
In planning future services for alcoholics it is essential to recognise the interdependence of types of provision—

The Question having been proposed after Ten o'clock on Monday evening and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at eight minutes past One o'clock.